On 26 January, draft legislation has published by the Government of UK on the reform of the Corporation Tax loss relief rules. This reforms the tax treatment of certain types of carried-forward loss for corporation tax purposes. The legislation takes effect from 1 April 2017.
The reform has 2 aspects. It provides more flexibility in how losses arising on or after 1 April 2017 can be relieved when they are carried forward; and it limits the amounts against which all carried-forward losses (whenever they arise) can be relieved to 50% of profits, subject to an annual allowance.
The schedule is set out in 9 parts. Part 1 creates separate rules for losses arising before 1 April 2017, and for losses arising on or after 1 April 2017. Part 2 sets out how the restriction of relief to 50% of profits will operate. Part 3 sets out a new form of group relief for carried-forward losses. Part 4 contains specific rules for insurance companies. Part 5 contains specific rules for creative industries. Part 6 contains anti-avoidance provisions. Parts 7 and 8 contain minor and consequential amendments.
