Tax Relief | Chippendale and Clark

Tax loss relief – Everything you need to know

General, Tax

Are you up to date with the new reforms to corporation tax loss relief?

Originally scheduled to come into force this year, the objectives of this policy are two-fold; to firstly make tax relief more flexible for businesses, and secondly to ensure the fair payment of tax by all. Essentially, this will be done by restricting the loss relief available to those businesses that make substantial profits.

What changes does it involve?

This new policy primarily focuses on two key areas;

  • Loss Relaxation – referring to the fact that any losses arising from the 1st April 2017 and carried forward, can be set against the total taxable profits of a company. Previously these were restricted to particular types of profits, and so the change will bring a more flexible way to utilise losses.
  • Loss Restriction – the amount of profit that can be relieved with carried-forward losses will be restricted to 50% of the profits during the period. Note, however, that companies will also be entitled to an annual allowance of £5m, where losses can be used without the 50% restriction. Because of this, it is expected that 99% of companies will be unaffected by the loss restriction.

Will my business be affected?

The rules apply to all companies that pay corporation tax and have carried-forward losses, as of 1st April 2017.

The government specifies that both the loss restriction and loss relaxation will apply to:

  • trading losses
  • non-trading deficits on money lending
  • management expenses
  • UK property losses
  • non-trading losses on intangible fixed assets.

In short, the impact of changes to loss restrictions are most likely to affect those businesses that have to make large upfront costs and investments before they see any profit.

Need further help?

If you think your business might be affected by these changes, it’s worth thinking ahead – any delays in using losses could affect your tax forecasts and profit projections.

The rules related to this policy can be long and complicated. To navigate the changes most effectively and efficiently, talk to your accountant; they are in the best position to advise on how to make the most of reliefs available to you while creating minimal disruption for your business.

If we lost you at “corporation tax reform” don’t worry – the team at Chippendale & Clark are here to deal with your tax affairs so that you don’t have to. We talk in real terms, so you can be confident you not only understand how your finances are being managed but can be sure you’re always getting the best deal for your business.

For more information just get in touch, we’re always happy to talk.

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