The amount of capital gains that can be relieved by carried forward capital losses will be limited to 50 percent from 1 April 2020.
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.