The amount of capital gains realised by companies that can be relieved by carried forward capital losses will be limited to 50 percent from 1 April 2020.  The deductions allowance of £5 million per group per year that was introduced in 2017 will also be available to cover capital gains that can be offset with carried-forward capital losses.

The measure will impact large companies or groups making substantial capital gains.  

In year capital losses, including those transferred via s171A TCGA elections, and other in-year reliefs, such as group relief, can be offset in full.  Where a s171A election to transfer gains is made in order to access the carried-forward capital losses of another company, the 50 percent restriction will apply to the amount of gains transferred.

An anti-forestalling rule effective from Budget day will prevent the artificial recognition of gains before the loss restriction comes into force via, for example, the use of bed & breakfasting arrangements or contracts with delayed completion for no commercial reason.

Accounting periods spanning 1 April 2020 will be split with the 50 percent restriction applying only to gains arising in the period from 1 April 2020.  Surplus capital losses arising in the notional period ended 31 March 2020 can be offset in full against gains arising in the notional period from 1 April 2020.

A consultation on the technicalities of implementation will run to 25 January 2019.

Iain Kerr

+44 (0)20 7311 5621

iain.kerr@kpmg.co.uk

Jignesh Gosran

i+44 (0)1293 652 138

jignesh.gosrani@kpmg.co.uk