Corporate capital loss restriction

The measure

Under current rules companies can offset up to 100% of their chargeable gains against capital losses brought forward from prior accounting periods. From 1 April 2020, it is proposed that the proportion of chargeable gains that may be relieved by losses brought forward will be limited to 50% for gains in excess of £5m. The first £5m of chargeable gains will remain eligible to be fully offset. 

This change will bring the treatment of capital losses brought forward in line with other categories of tax losses brought forward, following changes in 2017.

Who will be affected?

The measure will affect companies which generate chargeable gains of £5m or more in an accounting period and have brought forward capital losses. We anticipate that the £5m will be a group wide threshold. 

When will the measure come into effect?

The 50% limitation on the offset of brought forward capital losses will apply from 1 April 2020. The government will consult on the detailed design of this change and legislate in Finance Bill 2019/20. The measure is subject to anti-avoidance rules that will apply with immediate effect. 

Our view

For some taxpayers this will be a significant change, and potentially unwelcome. Affected taxpayers may wish to participate in the consultation process to ensure that areas of complexity, such as the application of the rules to groups of companies, are adequately addressed.