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Does new CT loss relief have a time limit?

Trading losses can be relieved against total profits only in the later period and the further period

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Trading losses can be relieved by S45 against profits of the same trade in "subsequent accounting periods" i.e. indefinitely - periods, plural.

But relief against total profits is stated by S45A to be relievable in "the later period" and by S45C in "the further period," in both cases the word period being singular. I can only read this as meaning the relief is only available for the two years following the year of the trading loss. But as I've not seen anyone, anywhere make reference to this significant restriction I have to assume I've understood it wrong. Any thoughts (or even better, authorities)?

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24th Jun 2019 06:48

What do you mean, authorities? You're reading the law; that is THE authority.

I can see your point, on a small screen. But it's fiddly reading legislation this way. Let me look again with a big screen later.

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By Rweaver
24th Jun 2019 07:12

IA 1978 s.6(b)?

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to Rweaver
24th Jun 2019 07:35

I'm expecting it to be clear from the sections themselves and that they'll work a bit like a Turing Machine, processing one period at a time before clicking onto the next.

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24th Jun 2019 09:00

I would read S45C as cyclical, in that if there is a brought forward loss, this can be carried forward to the next year, then the next year that loss is the brought forward loss and can be carried forward again.

There is no limit to how many times this can be applied.

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24th Jun 2019 09:56

OP, Turing and cyclical Duggimon are both correct. (It's a form of iteration... https://revisionmaths.com/advanced-level-maths-revision/pure-maths/algeb...)

S45C does not apply unless s45A(4) applied to the previous period (s45C(1)(a)). If that condition is met, S45C allows you to reapply s45A(4) to the current period. Then, when you get to the next period and look back to the current one, when you ask "did s45A(4) apply?" you can say yes...

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to Tax Dragon
24th Jun 2019 11:53

You mean induction (https://en.wikipedia.org/wiki/Mathematical_induction)

Ever thought about moving to that sanctuary for loveable-but-motheaten dragons?

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By DJKL
to Tax Dragon
24th Jun 2019 12:57

Honahlee?

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By corcyra
25th Jun 2019 10:18

Grateful thanks to all. I think there remain two arguments for the narrow view:
1. 45C(1)(c) says the company continues to carry on the trade in the accounting period ("the further period") after the later period. 'The' not 'an.' This is the only definition of further period there is.
2. If the intent was to give indefinite relief similar to S45, why not use similar wording? Why have separate SS 45A and 45C when one would do the job?
The argument that the relief is indefinite is
1. No article anywhere has mentioned the relief needs to be claimed in two years
2. Perhaps more important, neither does the HMRC internal manual.

Conclusion: I think I know the advice I'll give, but it won't be with as much confidence as I'd like, especially as there isn't any case law yet.

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to corcyra
25th Jun 2019 10:34

You are making the mistake of importing the definition of "the later period" in s45C(1)(a) from s45A(1)(c).

There'll never be case law on this. Such arises when HMRC takes a different view.

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By corcyra
to Tax Dragon
25th Jun 2019 11:17

That's exactly what I had done - it seems to me to be what the wording requires. But if that's a mistake, then good!

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to corcyra
25th Jun 2019 11:40

That's nothing that requires that importation.

Here's a test of that observation: read s45C with "the relevant period" substituting "the later period" in all places except ss3(b) and let me know whether it has stopped making sense.

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By corcyra
to Tax Dragon
25th Jun 2019 13:19

Once again, I'm grateful to you for taking so much trouble.

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to corcyra
25th Jun 2019 14:16

I like a good question. Yours was just that :)

I thought you might knock me back a bit though with the substitution approach.

For any future readers, I don't really think that substituting expression A for expression B and seeing whether it still makes sense validly tests (as a rule) whether or not it is correct to import a defined meaning to expression B. In this case however the substitution reveals what the section (45C) actually says and means – that, of course, was the objective.

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By trecar
26th Jun 2019 15:29

What happened to the HMRC mantra that tax is simple and we can all do it? Although this question and the answers all suggest that the response that you need degree level understanding to actually complete a return suggests HMRC may have got it wrong. Navigating your way around legislation is not for the faint hearted. Just to complicate matters further, the position since 1 April 2017 altered matters with regard to how losses may be set off against future profits.

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By corcyra
to trecar
26th Jun 2019 17:18

I agree trecar and I still believe my original interpretation is what the words used actually say. But I read that some years ago, in a cabinet meeting, Jack Straw (a barrister) said a certain piece of (non tax) legislation meant xyz - and Lord Irvine said, oh shut up, they mean abc. In other words, the drafting of legislation is not what it might be.

Why not just follow the nice, clear wording of S45 in S45A and dispense with 45C altogether?

I have considered Tax Dragon to be our Lord Irvine, telling us what the words are understood to mean in practice - which is what matters.

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to corcyra
26th Jun 2019 17:47

I'm just saying it as I see it.

If s45C started with: "This section applies if an amount of a loss made in a trade is carried forward to the later period of a company under section 45A(4)…" I think I would have to agree with you.

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26th Jun 2019 16:29

anyone doing PE1 want to answer this exam question?

Lossess. carry forward forever carry back one year

extrapolate back further on terminal loss relief … ooh but how far?

look at side ways relief v CGT etc

look at carry forward and can it go forward and sideways and well then we have to think about the rules before they changed and after they changed...

but you know there's allsorts of rules on CT lossess and some limits on how much you can use...

but Cfwd… that's an easy one my lovelies... yes

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