HMRC is amending its new corporate loss relief rules to correct defects in the legislation.
HMRC has said it will introduce amendments in the 2018/2019 Finance Bill to correct defects in its April 2017 reforms to loss relief for companies and to ensure that the legislation works as intended.
Amendments that will be most relevant to SME company clients are:
- The deductions allowance that can be used by a company that is a member of a group will be restricted so that where that company is a member of one group and an ‘ultimate parent’ of another, it can only use a share of the allowance from the group of which it is a member.
This applies in relation to accounting periods beginning on or after 6 July 2018 (and to amounts falling after 6 July 2018 where an accounting period straddles 6 July 2018) and will prevent groups from acquiring new members to boost the amount of the deductions allowance available.
- The terminal loss relief rules will be amended to ensure that where the three-year timeframe for which relief is due starts part way through an accounting period, the total relief due for that accounting period is restricted to the proportion of the total profits for the accounting period that falls within that three-year timeframe.
This will apply to accounting periods beginning on or after 1 April 2019.
Various amendments will also be made to tighten up the April 2017 extension to the anti-avoidance provisions around where there is a transfer of a trade under common ownership (sometimes known as a hive down).
Please note that this document was prepared by a third party and as such Brewin Dolphin is not responsible for the content or able to answer queries on the topics dealt with. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change. Therefore you should not rely on this information without seeking professional advice from a qualified tax adviser, who should also be able to assist you with any questions on the content.
This document was prepared as a general guide only and does not constitute tax or legal advice.
CORPORATION TAX LOSSES – HMRC TIGHTENS ITS RULES