Carrying Forward Corporation Tax Losses

When your company makes a loss, you don't lose that tax relief forever. You can carry forward unused losses to offset against profits in future years, reducing your Corporation Tax bill when times are better. The rules depend on the type of loss and when it was made, with important changes introduced from April 2017.

What losses can be carried forward?

Your company can carry forward three main types of losses:

Trading losses – losses from your company's trade can be carried forward indefinitely, as long as you continue the same trade. How you can use these losses depends on when they were made.

UK property business losses – if your company owns rental properties and makes a loss, these can be carried forward to future accounting periods.

Capital losses – losses on the sale of capital assets (like property or shares) that weren't used in the year they occurred must be carried forward.

Trading losses: the 1 April 2017 rule change

How you use carried forward trading losses depends on when your company made the loss.

Losses made before 1 April 2017 can only be offset against profits from the same trade in future years. You cannot use them against other types of income.

Losses made on or after 1 April 2017 can normally be offset against your company's total profits – not just trading profits from the same trade. This gives you much more flexibility. If your company is part of a group, other group companies may also be able to use these losses through "group relief for carried forward losses".

For accounting periods ending before 1 April 2017, the old rules apply and you can only use carried forward trading losses against the same trade.

UK property business losses

Property business losses work differently. Your company can carry forward unused property losses and apply them against total profits – regardless of whether the loss was made before or after 1 April 2017.

If your company is part of a group and made property losses on or after 1 April 2017, other group companies may be able to use those losses.

There's one exception: if the loss arose when your company was paying Income Tax (rather than Corporation Tax) on its property income, you can only carry that loss forward against future UK property income, not total profits.

Capital losses

Capital losses must be carried forward if you don't use them in the same accounting period they occur. You can only set these losses against future capital gains, not against other types of profit like trading income.

In some situations – for example, when a company joins a new group – the use of carried forward capital losses may be restricted.

Restrictions on using carried forward losses

There are restrictions on how much of certain carried forward losses you can use in any one year. These restrictions apply to both trading losses and property business losses carried forward from 1 April 2017 onwards.

The rules allow you to use losses against a certain amount of profit without restriction, but limit relief beyond that threshold. This prevents companies with large accumulated losses from avoiding Corporation Tax entirely when they return to profit.

Accounting periods that straddle 1 April 2017

If your company has an accounting period that started before 1 April 2017 and ended on or after that date, you need to split (or "apportion") any trading losses made during that period.

You also need to apportion property business losses if your company is part of a group.

You can do this based on time – working out what proportion of the period fell before and after 1 April 2017. If this doesn't give a fair result, you can use another method that is just and reasonable.

This splitting matters because different rules apply to the two portions of the loss.

Flexibility in using losses

From 1 April 2017 onwards, you have more control over how much carried forward loss relief to claim.

For trading losses made on or after 1 April 2017 (used against total profits) and for property business losses, you can choose to:

• Use the full amount available
• Use only part of the losses
• Use none at all (by entering 0)

This flexibility lets you manage your tax position strategically. You might choose to use less loss relief in a year when you qualify for other reliefs, or save losses for future periods when you expect higher profits.

For trading losses made before 1 April 2017 (which can only be used against the same trade), this flexibility only applies to accounting periods starting on or after 1 April 2017.

Record keeping requirements

You must keep separate records showing:

• Carried forward trading losses made before 1 April 2017
• Carried forward trading losses made on or after 1 April 2017

If your company is in a group with property business losses, keep separate records for property losses made before and after 1 April 2017 as well.

Keeping these records separate ensures you know how much of each type of loss remains available and apply the correct rules when claiming relief.

Claiming losses on your Company Tax Return

You claim different types of carried forward losses in different boxes on your CT600 Company Tax Return:

• Box 160: Trading losses against profits of the same trade (all losses made before 1 April 2017, plus any same-trade claims for later losses)
• Box 285: Trading losses set against total profits (losses made on or after 1 April 2017)
• Box 250: UK property business losses
• Box 215: Capital losses

Sources

• Carry forward Corporation Tax losses
• Corporation Tax: calculating and claiming a loss
• Corporation Tax: terminal, capital and property income losses
• Running a limited company: Company and accounting records
• Company Taxation Manual CTM04835
• Corporation Tax: Company Tax Return CT600 (2015) Version 3

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.