PIM4230 - Losses: rules (CT)
Main principles
The CT Schedule A loss relief rules are contained in
ICTA88/S392A.
CT Schedule A losses incurred by a company should be relieved
as shown below.
- The loss must, first of all, be set
against the company's total profits for that accounting period -
ICTA88/S392A (1).
- To the extent that such losses cannot be
relieved against total profits of the same accounting period (and
are not surrendered as group relief - see
PIM4240), they should be carried forward
for set-off against future total profits as long as the same
Schedule A business is carried on in the succeeding accounting
period - ICTA88/S392A (2).
- Where an investment company or, from 1
April 2004, a ‘company with investment business’ (as
defined by ICTA88/S130) with a Schedule A business ceases to carry
on such a business, any unrelieved Schedule A losses are treated as
management expenses (ICTA88/S75) of the next accounting period.
They can be set against the profits of that or a subsequent period
as long as the company continues to qualify as an investment
company or, from 1 April 2004, a ‘company with investment
business’ - ICTA88/S392A (3).
- But a company which is not an investment
company or, from 1 April 2004, a ‘company with investment
business’ cannot carry forward unrelieved Schedule A losses
beyond the end of the accounting period in which the Schedule A
business ceases.
Uncommercial losses etc.
CT Schedule A losses may only be relieved as outlined above
where a company carries on a Schedule A business:
- on a commercial basis - see ICTA88/S392A
(5).
or
- in the exercise of statutory functions (as
defined in ICTA88/S392A (7)).
ICTA88/S392A (6)(a) permits the exclusion from the Schedule A
loss relief provisions of that part of a Schedule A business not
carried on on a commercial basis (for example, a holiday property
let at a nominal rent to directors of the company).
Other aspects of CT Schedule A losses
There is separate guidance on:
