OT21055 - Corporation Tax Ring Fence and Supplementary Charge

Loss Carried Forward

Under ICTA88/s393, where a company incurs a loss in a trade, that loss can be carried forward and allowed against subsequent income from the same trade. Where a company carries on one world-wide petroliferous trade, but is deemed to have two separate trades under ICTA88/s492(1) because of the ring fence, a non-ring fence loss can only be carried forward and allowed against subsequent non-ring fence income. Non-ring fence losses cannot be carried forward and allowed against ring fence profits of the same trade. In principle, the same position arises for ring fence activities, but ICTA88/s492(4) recognises the basic premise that there is no objection to ring fence losses being allowed against non-ring fence profits. Under s492(4) ring fence losses incurred in an AP can be allowed under ICTA88/s393 against future income from non-ring fence activities as long as the non-ring fence and ring fence activities comprise a single trade. It should be noted that relief is due whether or not the non-ring fence element was being carried on during the AP in which the loss in the ring fence trade was incurred.

Where losses are carried forward under ICTA88/s343 (company reconstructions without a change of ownership), losses must continue to be segregated as above so that non-ring fence losses of the trade transferred are not allowed against ring fence profits of that trade.