When are claims for carried forward (c/fwd) loss relief restricted? Who is impacted by these restrictions? What are the compliance obligations associated with these restrictions?

A guide for subscribers.

At a glance

This guidance note specifically addresses the restriction applied to c/fwd loss relief claims when a company surpasses the relevant maximum limits, introduced in April 2017. For broader guidance on corporate loss reliefs and associated restrictions, please consult Losses: Trading and other losses

From 1 April 2017 

  • Carried forward loss relief claims can be restricted. 
  • This restriction applies to all brought forward (b/fwd) losses, regardless of whether they arose pre or post-April 2017. 
  • The maximum b/fwd loss relief claim is restricted to the lower of: 
    • the unrelieved b/fwd trading losses
    • 50% of the company's unrelieved profits 
  • The restricted amount of carried forward losses may be increased if a company claims its Deduction Allowance (DA) for that period. 
  • DA of £5,000,000 per accounting period is available for each standalone company (or, in the case of a group of companies, the group as a whole). 
  • The DA must be proportionally reduced for accounting periods of less than 12 months.

Compliance requirements 

  • Standalone companies must detail the specified amount of DA claimed in their supporting computations.
  • Companies within a group must:
    • Nominate a company.
    • The nominated company is required to submit a Group Allowance Allocation Statement (GAAS) to HMRC for every accounting period.
    • Each company within the group must detail the specified amount of DA claimed in their supporting computation. This should match the amount shown on the GAAS.

Failure to follow the above guidance could lead to none of the companies being entitled to claim the DA and, potentially further restricting loss relief.