BKM304700 - Bank loss restriction: calculation of carried-forward reliefs available: where banking company has more than one trade

In some cases a banking company may have more than one trade either for statutory reasons or, more rarely, as a question of fact. Where the banking company has pre-2015 carried-forward trading losses in multiple trades the company is able to allocate the restriction between the different pools of losses.

The examples below relate to the pre-1 April 2017 calculation at CTA10/S269CD. However, the same principle applies for the post-1 April 2017 calculation and for the general loss restriction (CTA10/PART7ZA, CTA10/S169ZF).

Example 1

  • The banking company has two trades: Trade A and Trade B. The company has £2m of pre-2015 carried-forward trading losses from Trade A, and £2m from Trade B
  • In the year ended 31 March 2016 the company makes £0.5m of trading profits in Trade A, and £0.5m for Trade B. The company has no other profits or reliefs for the period.

The company performs a calculation under CTA10/S269CD of relevant profits (BKM304300) and finds that it has trading profits at step 2 totalling £1m, and (with no other reliefs for the period) relevant trading profits at step 5 of £1m.

CTA10/S269CA(2) would therefore allow (50% of £1m) £0.5m of relief for the pre-2015 trading losses. The company can choose whether the £0.5m of allowable pre-2015 carried-forward trading losses is for the pool of Trade A losses, Trade B losses, or a combination of the two.

Example 2

The calculation at CTA10/S269CD will total the profits of all trades for the purposes of calculating relevant trading profits, even where the banking company does not have pre-2015 carried-forward trading losses in all of those trades.

So, if the company in example 1 had no carried-forward losses for Trade B, it would still have relevant trading profits of £1m, meaning that it could allow £0.5m of pre-2015 carried-forward trading losses. The only available pre-2015 carried-forward trading losses are for Trade A, so this would mean that the company was effectively unaffected by the restriction.

Note that an arrangement to secure a position such as this by transferring in profits for tax motivated reasons could be caught under the targeted anti-avoidance rule in CTA10/S269CK (BKM307100).

If the company did have other reliefs for the period (say group relief) and claimed them against its trading profits it could decide which trade바카라 사이트™s profits were so relieved. This would reduce the overall amount of relevant profits for the purposes of CTA10/S269CD, but it might be beneficial, in Example 2, for the company to choose to relieve the profits of Trade B which has no carried-forward losses.