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CTA10/S269ZR to S269ZZB

Each company or, if a member of a group (CTM05160), the group will be entitled to a deductions allowance.

»Ê¹ÚÌåÓýapp deductions allowance applies only to determine the amount of carried-forward losses a company can use. It is not a tax-free allowance and does not itself provide any relief from tax. Rather, it enables companies to gain greater use of their carried-forward losses than would otherwise be possible in accordance with the restriction.

»Ê¹ÚÌåÓýapp amount of the deductions allowance is included in the computation of the relevant maxima (CTM05090). »Ê¹ÚÌåÓýapp relevant maxima determine the amount of profits against which restricted carried-forward losses may be set.

A company’s relevant maximum for total profits, for example, is 50% of the company’s relevant profits (CTM05080) plus the total amount of its deductions allowance.

It follows that if a company has profits that are lower than the amount of the deductions allowance, carried-forward losses may be set against those profits without restriction.

Where a company’s restricted carried-forward losses include streamed losses (CTM05020), it will need to calculate relevant maxima for trading and non-trading profits and (from 1 April 2020) chargeable gains. This involves allocating the deductions allowance to give the trading profits deductions allowance, non-trading income profits deductions allowance and chargeable gains deductions allowance. »Ê¹ÚÌåÓýapp company has free choice as to how its deductions allowance should be allocated between trading profits, non-trading income profits and chargeable gains (CTA10/S269ZB(7), CTA10/S269ZBA(5) and CTA10/S269ZC(5)) (CTM05080).

A company with streamed restricted carried-forward losses should show how it has allocated its deductions allowance between its trading profts, non-trading income profits and chargeable gains as part of its return, for example in the tax computations.

»Ê¹ÚÌåÓýapp amount of a company’s deductions allowance depends on the length of the company’s accounting period and whether the company is:

• Not a member of a group for any part of the accounting period (CTM05130),
• A member of a group for the whole of an accounting period (CTM05140), or
• A member of a group for part of the accounting period (CTM05150).

A company should specify the amount of its deductions allowance in its return (CTA10/S269ZZ).