Corporate Capital Loss Restriction

Under current rules up to 100% of chargeable gains can be set against carried-forward capital losses. For accounting periods ending on or after 1 April 2020, large companies and unincorporated associations who accrue chargeable capital gains will only be able to offset up to 50% of those gains using carried-forward allowable (capital) losses. The measure is subject to anti-avoidance rules that took effect from 29 October 2018.

There will be an allowance that means the first £5 million of profits can be offset with carried-forward losses before the 50% restriction is applied. This allowance is in tandem with the Corporate Income Loss Restriction (CILR). This will ensure that over 99% of companies are unaffected by the restriction. The new measure is expected to impact about 200 corporates each year who will pay additional tax as a result of this measure.

These rules are in line with the CILR for carried forward income losses that was introduced in 2017 and the new capital losses rules effectively mirror the income losses rules. Transitional rules will apply to companies with accounting periods that straddle the 1 April 2020 implementation date.