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Draft Finance Bill: Corporate Capital Loss Restriction

Draft Finance Bill: Corporate Capital Loss Restriction

Capital losses offset restricted to 50 percent of gains from 1 April 2020.


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The draft clauses for Finance Bill 2019-20 included legislation for a new corporate capital loss restriction. 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.

Accounting periods straddling 1 April 2020 will be split with the 50 percent restriction applying only to gains arising in the period from 1 April 2020. There will be no restriction applied to capital losses arising in the straddling period where these can offset capital gains arising in either of the notional periods.

Where brought forward connected party capital losses or pre-entry capital losses could have been offset but for the restriction, a claim can be made to deduct these losses without restriction in preference to capital losses that arose in the period but the latter are then restricted. This allows restricted carried-forward losses to be used in preference to unrestricted in-year capital losses.

Standalone dormant companies and companies which are members of dormant groups who have a one-day accounting period purely as a result of chargeable gains will be able to access the full £5 million deductions allowance. They will not be restricted to 1/365th of £5 million which would have resulted in companies with relatively small gains facing a loss restriction.

Companies with multiple one-day accounting periods in a financial year (1 April to 31 March) will be able to offset capital losses against capital gains arising in that financial year without restriction.

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