The document summarizes new rules for corporate loss relief in the UK, comparing old and new rules. Under the new rules, there is increased flexibility to use losses but also more restrictions. Losses can now be offset against total profits up to £5 million and 50% of remaining profits, rather than just same trade/type profits as before. Group relief rules were also relaxed to allow surrender of carried-forward losses, not just in-year losses. However, more anti-avoidance rules were introduced to restrict loss utilization in certain sectors and circumstances.

1. Corporate losses:
now and then
1 — anne.fairpo@templetax.com – April 2018

2. Overview of new rules
‣ increased flexibility … at a price
‣ restriction on offset
‣ more anti-avoidance
‣ and two sets of loss relief rules: pre & post 1 April 2017
2 — anne.fairpo@templetax.com – April 2018

3. Overview ../2
‣ corporate loss relief rules now apply to:
‣ trading losses
‣ non-trade losses on intangible fixed assets
‣ management expenses
‣ non-trading loan relationship deficits
‣ UK property business losses
3 — anne.fairpo@templetax.com – April 2018

4. Overview ../3
‣ changes do not apply to;
‣ capital losses
‣ income tax losses
‣ changes do not directly alter:
‣ carry-back of loss
‣ in-year relief for losses
‣ in-group group relief
4 — anne.fairpo@templetax.com – April 2018

5. Carried-forward losses: restriction
‣ applies now whenever the losses arose (pre- and post-1 April 2017)
‣ group limited to £5m full offset, then 50% of profits
‣ group with >£5m of profit will always pay tax
‣ further limitations for streamed losses
5 — anne.fairpo@templetax.com – April 2018

6. Carried-forward losses: relaxation
‣ increases flexibility in use of losses/profits
‣ no streaming for losses arising post-1 April 2017
‣ c/f losses can be set against total profits, subject to some restrictions
‣ pre-1 April 2017 losses still streamed
‣ straddle period: apportion losses on time basis (or just & reasonable if time basis is not J&R)
‣ non-streamed relief must be claimed, allows companies to choose to use cf losses
‣ streamed losses relieved automatically, but can claim to prevent
6 — anne.fairpo@templetax.com – April 2018

7. Carried forward losses: group relief
‣ c/f losses can be surrendered to groups and consortium members
‣ unrestricted post-1 April 2017 losses only
‣ unless can use against own profits, or:
‣ has no income-producing assets
‣ changed ownership in last five years & pre-change losses
‣ overseas PE loss, and could use overseas
‣ loss of UK PE or dual-resident company, subject to conditions
7 — anne.fairpo@templetax.com – April 2018

8. Restrictions
‣ specific rules restrict offset against total profits for:
‣ insurance companies (where BLAGAB)
‣ creative industries
‣ oil & gas ring-fenced, or oil contractor
‣ transferred trades
‣ farming, where losses made for previous 5+ years
‣ can usually still carry forward against profits of same trade
8 — anne.fairpo@templetax.com – April 2018

9. Targeted anti-avoidance rules
‣ TAAR for main purpose of obtaining loss-related tax advantage where reasonable
to regard arrangements as intended to circumvent limitations or exploit loopholes
‣ loss-refresh restriction applies to carried-forward property and non-trading
losses on intangibles
‣ MCINOCOT rules extended from three to five years if change post-1 April 2017
‣ groups: can't buy in losses to offset against gains on group transferred assets
9 — anne.fairpo@templetax.com – April 2018

10. Summary: compare & contrast
OLD RULES NEW RULES
All profits can be offset Group £5m plus 50% cap on offset
Carry forward against same
trade/type
Carry forward against total profits
Group relief in-year only Group relief for carried-forward
losses
10 — anne.fairpo@templetax.com – April 2018

11. Questions?
11 — anne.fairpo@templetax.com – April 2018