The UK budget measures are to be announced on 18 March 2015 and after that date the Finance Bill 2015 will be published. Among the measures to be included in the Finance Bill 2015 is a provision to restrict the amount of loss relief that can be offset by banking companies. This will make sure that the banks are paying some corporation tax on their profits even if they have tax losses brought forward from the financial crisis.

The definition of banking companies would include the deposit-taking banks, building societies and other similar institutions. The loss restriction would apply in the case of trading losses, non-trading loan relationship deficits or management expenses incurred prior to 1 April 2015. The restriction would not however apply to losses incurred by a UK property business and would not apply to capital losses.

The losses carried forward and offset against profits would be restricted to 50% of relevant profits, these being profits adjusted for taxation and after deducting group relief, consortium relief and charitable donations. To protect new companies entering the industry, the restrictions would not apply to a bank in a group that commenced its activities on or after 1 April 2010.

There will be anti-avoidance provisions included in the Finance Bill to prevent companies accelerating the use of their losses before the measures take effect. Another anti-avoidance provision will be included to prevent groups shifting profits around to lessen the impact of the new measures on the group.

The legislation when passed by parliament will apply in the case of losses incurred before 1 April 2015 and offset against profits arising after that date. Banks will therefore need to consider carefully their use of available losses after 1 April 2015.