Post-April 2017 losses will be able to be set against total profits, whilst pre-2017 losses trading losses will only be able to be set against profits of the same trade.
The profits that losses can be carried-back to will be limited to those generated from 1 April 2017.
Companies also will need to track their carried-forward losses that arose up to 31 March 2017 separately from losses that arose from 1 April 2017.
On-going costs include tracking losses, additional reporting regarding how losses are allocated on the CT600 and CT600C returns.
Losses arising from 1 April 2017 when carried forward will have increased flexibility and can be set against the total taxable profits of a company and its group members (‘loss relaxation’).
For all carried-forward losses, whenever they arose, companies will be able only to use the losses against up to 50% of profits (‘loss restriction’).
These figures are set out in table 2.1 of Budget 2016 and have been certified by the Office for Budget Responsibility.
More details can be found in the policy costings document published alongside Budget 2016.
Carried-forward losses can only be used by the company that incurred the loss, and not used in other companies in a group.The measure will modernise the UK’s loss relief regime by increasing the flexibility over the profits that future carried-forward losses can be relieved against whilst ensuring that businesses pay tax in each accounting period that they make substantial profits. The government consulted on the measure from 26 May to 18 August 2016, and will publish its official response to the consultation on 5 December 2016.The reforms will have effect for accounting periods ending on or after 1 April 2017.As such, it is very unlikely that there will be any impact on equality.This measure is expected to have a significant impact on businesses within the charge to UK .This can lead to a company paying no tax in a year that it makes substantial profits.Legislation will be introduced in Finance Bill 2017.© Crown copyright 2016 This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated.To view this licence, visit uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected] standalone company or group will be entitled to a £5 million annual allowance.Profits within the allowance will not be restricted, ensuring 99% of companies are unaffected by the restriction.