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This section sets out how to calculate the cap on the set-off of carried forward losses against total profits for an insurer carrying on BLAGAB. »Ê¹ÚÌåÓýappse rules apply after 5 July 2018. LAM15400 deals with the calculation for the period between 1 April 2017 and 5 July 2018.

Carried forward BLAGAB trade losses are a relevant deduction under CTA10/S269ZD(3) but they must be set as far as possible against BLAGAB trade profits FA12/S124A/S124C (6) before they can be set-off against total profits (FA12/S124B(3), surrendered as group relief (CTA10/S188BB) or carried forward to a subsequent period FA12/S124A(2), FA12 /S124C(3).

»Ê¹ÚÌåÓýapp maximum amount of relief the company can obtain for its relevant deductions i.e. losses carried forward for deduction from total profits (see CTM05020) is calculated in a series of steps:

1. Calculate the modified total profits

»Ê¹ÚÌåÓýapp modified total profits for an insurer carrying on BLAGAB (step 1 CTA10/S269ZF(3) as modified by CTA10/S269ZFB) are the total taxable profits of the period before deducting any in year reliefs or carried forward reliefs, calculated in accordance with step 1 of CTA10/S4(2), modified to exclude:

• taxable distributions (CTA09/PART9A)

• the policyholdersâ€� share of I-E profits (CTA10/S269ZFB modifies CTA10/269ZF4(d))

Where exceptionally there are trade losses carried forward that are shock losses (LAM15300) these are deducted when calculating modified total profits.

»Ê¹ÚÌåÓýapp adjustment for taxable distributions refers only to those distributions which are taxable by virtue of CTA09/PART9A and not to distributions which form part of the computation of non-BLAGAB.

1. Calculate the company’s relevant profits

»Ê¹ÚÌåÓýapp company’s relevant profits for the accounting period are:-

• »Ê¹ÚÌåÓýapp modified total profits, less

• In-year reliefs calculated under step 2 of CTA10/S269ZF(3) (see CTM05060) less

• the amount of the company’s deductions allowance for the accounting period.

1. Calculate the relevant maximum

»Ê¹ÚÌåÓýapp relevant maximum is the sum of:

• 50% of the company’s relevant profits for the accounting period and

• the amount of the company’s deductions allowance for the accounting period.

1. Calculate the maximum amount of relief available for its relevant deductions

»Ê¹ÚÌåÓýapp maximum amount of relief available for its relevant deductions is:

• »Ê¹ÚÌåÓýapp relevant maximum {#},

Less the sum of:

• Any deductions made for restricted streamed carried-forward trading losses under CTA10/S45(4)(b) or S45B and

• Any deductions made for restricted streamed non-trade loan relationship deficits under CTA09/S457(3) or S463H(5)

Example

For the accounting period 1 January 2020 to 31 December 2020 the table below sets out the profits and losses for the company and steps in the calculation of the maximum set-off of carried forward losses against total profits. A valid claim is made to set BLAGAB trade losses carried forward against total profits.

Tax computation 1 January 2020 to 31 December 2020	total profits	BLAGAB trade	non BLAGAB	Shareholder share I-E	Long term business fixed capital NTLR credit	Notes
Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Profit/loss of the period after in year relief	50	400	0	20	Ìý	Ìý
pre -1/4/17 losses carried forward	Ìý	-100	0	0	Ìý	Ìý
post 1/4/17 losses carried forward	-700	0	0	0	Ìý	Ìý
Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
maximum trading/NT set-off before deductions	50	200	N/A	10	1, 2	Ìý
Modified total profits	420	N/A	400	0	40	Ìý
Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Relevant total profits	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
total profits	420	Ìý	Ìý	Ìý	Ìý	Ìý
less deductions allowance	-5	Ìý	Ìý	Ìý	Ìý	Ìý
Relevant profit	415	Ìý	Ìý	Ìý	Ìý	Ìý
Relevant Maximum	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
50% relevant profits	207.5	Ìý	Ìý	Ìý	Ìý	Ìý
add deductions allowance	5	Ìý	Ìý	Ìý	Ìý	Ìý
Relevant maximum	212.5	Ìý	Ìý	Ìý	Ìý	Ìý
Maximum amount of relief	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Relevant maximum	212.5	Ìý	Ìý	Ìý	Ìý	Ìý
less restricted streamed\nnon-BLAGAB losses set-off	-100	Ìý	Ìý	Ìý	Ìý	Ìý
Maximum relevant deduction	112.5	Ìý	3	Ìý	Ìý	Ìý

Notes

1 »Ê¹ÚÌåÓýapp set-off of post 1/1/2017 BLAGAB trade losses against BLAGAB trade profits is mandatory FA12/S124A.

2. »Ê¹ÚÌåÓýapp set-off of pre-1/4/2017 non -BLAGAB trade losses is not mandatory CTA10/S45(4A)

3. In this example only post 1/4/2017 BLAGAB trade losses are available to set off against total profits. Subject to the maximum the company can choose the amount it wishes to set-off. If other relevant deductions were available the company could also choose the order of set-off.

Carried forward BLAGAB trade losses of 132.5 can be set against total profits. »Ê¹ÚÌåÓýappre will be a consequential reduction in BLAGAB management expenses FA12/S78(5) equal to the amount set-off that would increase the I-E profits.