This guidance note examines in detail the relief available to groups for carried-forward losses. The scope excludes the treatment of specialist businesses such as banks, insurance companies and oil and gas companies.

Prior to 1 April 2017, it was not possible to surrender brought forward losses of any description against profits of any other companies within the group relief group. The consequences of such a rule meant that certain types of losses could be ‘trapped’ within individual legal entities with little or no prospect of relief. This has now changed, although subject to several conditions and numerous anti-avoidance provisions.

Development of the UK legislation

At Budget 2016, it was announced that the use of carried-forward losses would be relaxed to permit most brought forward losses to be surrendered to other companies in the group, subject to strict conditions. Subsequently, a new part has been inserted into CTA 2010, which has been modelled on the existing rules in CTA 2010, ss 97–188 (Pt 5). CTA 2010, ss 188AA–188FD (Pt 5A)

The legislation is introduced by F(No 2)A 2017, Sch 4, para 23 and applies generally from 1 April 2017. For anti-avoidance rules, see below.

HMRC issued draft guidance on 31 July 2017, which can be found here. This is a first tranche of guidance, focusing on the core rules and other aspects where guidance has been specifically requested. A second tranche of guidance was issued on 6 November 2017 and can be found here. The second tranche of guidance covers group relief for carried-forward losses and the relaxation of carried-forward non-trade losses. Further draft guidance on commencement provisions was issued on 7 December 2017.

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