Tax Relief for Group Companies 2018

HMRC has introduced a regulation to help group companies make use of the new carry forward loss relief. How and when can you make use of the simplification?

Loss relief changes. 2017 was a confusing year for tax. It included the move from a spring to an autumn Budget, no less than four Finance Bills and deferred changes to legislation, most of which were later reintroduced, while a few were amended or scrapped. There were important changes to the “corporate loss relief” rules.

Carried forward losses. As you’re probably aware, the two big changes were a cap on the relief for large companies and the entitlement to set losses (which arise from 1 April 2017) against the company’s total income for later years. Previously, losses carried forward to later years could be set only against profits of the same trade to which they related. For loss-making group companies, this usually meant that losses which were carried forward couldn’t be used by other companies.

New regulations. To help companies make use of the new carry-forward relief, HMRC has created a new regulation, which took effect on 30 January 2018. Its purpose is to extend the scheme (which was only for loss relief which hadn’t been carried forward) to allow each company within a group to nominate one of them to handle claims for loss relief in respect of carried forward losses for all of them. However, if you want to use this simplification you must obtain agreement from HMRC first.