ICAEW Rep 110/18: Carried-forward corporation tax losses

Released 12 September 2018

The Institute of Chartered Accountants in England and Wales (ICAEW) has raised concerns with HMRC about disclosure of carried forward losses on company tax returns.

Finance (No 2) Act 2017 introduced changes to how losses can be carried-forward by companies. Included in these changes is a requirement for a singleton company to specify the ‘deductions allowance’ for the period and to split this between different types of losses. Failure to state the allowance on the corporation tax return will result in the company only being able to carry forward losses against 50% of its future profits. The ICAEW is concerned that this imposes a disproportionate burden on the majority of companies when the Tax Impact and Information Note stated that 99% of companies would be unaffected by the restriction. The ICAEW is concerned that it is not clear, in legislation or guidance, exactly what must be stated and where to satisfy the requirements as there is no white space or box on the CT600 to state the deductions allowance. The ICAEW considers it is paramount that the guidance explains how and where this calculation should be presented and recommends that HMRC makes it clear exactly what will and will not be acceptable when meeting the requirements. The ICAEW further recommends that HMRC amends the existing CT600 return to include space to declare the deductions allowances and that the Company Losses Toolkit is updated to flag the requirement to those preparing the CT600.

View ICAEW Rep 110/18.

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