Corporation tax online service will reflect loss relief rules by end autumn 2017

HMRC has confirmed that new rules on carried forward losses will not be reflected in the Corporation Tax online service and CT600 return form until the end of autumn 2017 as the measures were dropped from the truncated Finance Act 2017 enacted before the June general election

The decision to drop the measure from the first Finance Act 2017 this year was part of a wider race to drop a raft of measures due to come into force from 1 April, which had not been fully scrutinised at committee stage in parliament.

As set out at Budget 2017 in March, the government had planned to legislate in Finance Bill 2017 to reform the rules governing corporate losses carried forward from earlier periods. The measure is still meant to be effective from April 2017 but legislation is still awaited and HMRC's reporting procedures do not reflect the requirements.

The reform will restrict the use of losses carried forward by companies so that they cannot reduce their profits arising on or after 1 April 2017 by more than 50%.

It will, however, relax the way in which companies can use losses arising on or after 1 April 2017 when they are carried forward.

Currently carried forward losses can only be used by the company that incurred the loss and certain losses can only be set against certain types of income, for example trading losses can only be used against trading profits. The reform will give companies more flexibility.

The loss relaxation will mean that losses arising from 1 April 2017, when carried forward, can be set more flexibly against the total taxable profits, rather than particular types of income.

The restriction will apply to a company or group’s profits above £5m. Carried forward losses arising at any time will be subject to the restriction.

Until the HMRC corporation tax online service and  CT600 is updated later this year companies will have to file online returns for an accounting period that ends before 1 April 2017 or ends after 1 April 2017 if they do not want to set carried forward losses against total profits, and/or are not required to restrict the amount of carried forward losses that are set against profits.

HMRC appears to be urging companies to delay their returns unless ‘you’ve an urgent need to file your Company Tax Return before the end of Autumn 2017’, according to the HMRC service availability page. Those with an urgent requirement to file annual returns should ‘contact HMRC for further advice’, it adds.

The HMRC guidance, Corporation Tax: service availability and issues, Changes that may affect your Company Tax Return, is available here

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