HMRC have updated their draft guidance on administrative requirements for the deductions allowance in relation to restricted corporation tax loss relief.
This draft guidance explains the additional administrative requirements included in Corporation Tax Act 2010 Part 7ZA that covers the restriction of Corporation Tax loss relief and how these requirements can be met, including a template for the group allowance allocation statement.
This guidance was amended on 17 December 2018 in response to feedback. This is the fourth tranche of guidance which covers the administrative requirements for the reform of Corporation Tax loss relief that was introduced in sections 18 and 19 and Schedule 4 of the Finance (No2) Act 2017 from 1 April 2017.
For accounting periods ending on or after 1 April 2017, companies of all sizes may have to fulfil some administrative requirements in relation to the restriction on relief for carried-forward losses at CTA10/PART7ZA. These requirements concern the deductions allowance, which plays a part in the restriction (CTA10/S269ZR, S269ZW).
The restriction at Part 7ZA only limits the amount of carried-forward losses a company can use where the company’s profits are above the amount of its deductions allowance. The deductions allowance is what prevents smaller companies and groups from having their use of losses affected by the restriction.
