Capital Losses

Changes to the use of brought forward Capital Losses in companies from 1 April 2020

Changes to offsetting Capital Losses from April 2020. These changes are coming into effect which impact the way UK companies can offset unused losses brought forward from earlier years.

With effect from 1 April 2017 there were a number of changes to the way losses from prior years could be used by companies. Although these changes introduced some flexibility into the way losses could be offset, as the losses arising after 1 April 2017 no longer need to be ‘streamed’, these changes also introduced a restriction in some cases on how many taxable profits of later years could be reduced by losses brought forward.

Capital losses were excluded from these 2017 changes and remained available to offset against capital gains in later years without any restriction.

Further changes are coming into effect from 1 April 2020 which will bring capital losses into the restriction. However there is no relaxation of the way such losses brought forward from prior years can be offset i.e. such losses will still only be able to reduce capital gains and not say trading profits.

What might this mean for your company?
  • The ‘annual deductions allowance’ for full relief for brought forward losses, of £5 million, now has to include any capital loss offset.
  • Subject to this £5 million annual deductions allowance, capital gains will only be able to be reduced by capital losses brought forward by a maximum of 50%.
  • Capital gains and capital losses arising in the same accounting period can still be offset in the year incurred without restriction.
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What can be done?

This could have a tax impact on companies that have large brought forward capital losses and that may make large capital gains in the future. Therefore it is very important to carefully consider the timing of any capital disposals in the short term if commercially possible.

We can help

As always please consult your usual contact for advice on this matter. Please do contact a member of our tax team, they will advise you on your current position and possible impacts.

For more information

For more information or advice, please contact a member of our tax advisory team on:

01483 416232