Losses and allowances

This schedule analyses the movement in tax losses and uses a columnar approach to stream the losses according to the loss, excess or allowance type.

Developing the schedule

Completing the schedule

The schedule is split into two main sections, current period losses and carried forward losses. By default, the software performs some of the loss allocations automatically, with selectors at the foot of the columns for disabling these allocations. There are data entry cells to facilitate other loss allocations E.g. to other periods, between group members etc. There is error-trapping to prevent over allocations and incorrect signage. Some of these are described in more detail below:

The user enters losses brought forward in the data entry cells in the middle part of the screen. If the file has been rolled forward from a prior year these cells will be automatically populated using the c/f amounts from the prior year file. If brought forward "losses" are for any reason no longer available they can be reversed out using the line Less: brought forward amounts no longer available.

There are data entry cells for losses to be surrendered by way of group relief, entered with a leading minus. The total is transferred to the P schedule, from which the Amounts surrendered as group relief schedule should be developed.

The Group relief cells will be automatically completed if the Group module is used to allocate losses amongst the group.

Beneath the Group relief section there is a section for loss carry back. Amounts can also be entered with respect to Trading losses, Non trade loan relationship deficits and excess capital allowances carried back to earlier periods.

The first row for amounts offset in earlier periods is reserved for the automatic carry back of losses to the prior period, and includes that period's end date in the caption. If a carry back amount is entered on this row, the software will automatically open the file for the prior period (i.e. not necessarily the last year in the case of a short period), and update it with the amount carried back. If this is the case the software will alert you the first time you attempt to enter the carry back - for more information, see Editing direct system links to other files. Please note that the loss carry back should be entered into the file corresponding to the later period so that it may be carried back to the prior period. To enter the carry back, double-click the relevant cell into which you want to enter the value to carry back, and then enter the value with a leading minus.

For all other carry backs, including where you do not wish to use the automatic functionality, enter the amount in one of the other "Offset in earlier periods" rows. You will need to manually enter the carry back amount into the file for the other period. If, for example, you are carrying back oil field decommissioning costs to multiple periods and need more rows than are provided you should enter the total carry back as a single figure and provide the analysis on a non-standard schedule.

From 2008 onwards rolled forward files contain a figure for the carry back capacity computed from the prior period computation and will give a warning if the figure is exceeded.

Note: For periods before 2007 or where the file has not been rolled forward, if you attempt to carry back an excessive amount the software will not warn you of this.

Capacity to bring back trade losses, NTLR deficits and excess capital allowances (from 2006)

Where the maximum carry back capacity has been calculated in the previous period prior to the file being rolled forward, the capacity will be shown in review mode after the current period loss section. This applies for Trading losses, Non trade loan relationship deficits and excess capital allowances. Where the amount to be carried back to the previous period exceeds the maximum capacity, an error will be displayed.

Note: Where qualifying charitable donations are available to be displaced in the previous period, this will be shown separately. Where the amount entered as carried back to the previous period exceeds the capacity without displacing qualifying charitable donations, but doesn?t exceed the capacity when qualifying charitable donations are displaced, a review note will be displayed.

Where it has not been possible to accurately calculate the maximum carry back capacity ? for instance because the previous period was greater than 12 months ? a review note will be displayed advising that the maximum capacity cannot be validated and should be reviewed and validated manually.

Losses are offset on a current year basis under CTA 2010, s37(3) against total profits of the same accounting period by default. The user can change the default setting using the selector flag at the foot of the Trading losses column (or use the Information > Losses item on the Global menu for financial years prior to 1993). If the file is linked into a group module file, it is also possible to control this flag from the O schedule of the Group module via the Current period Trading loss offset selector that appears on the corresponding company row.

If a company surrenders losses as group relief, the current year offset is computed after any loss surrendered as group relief. In multi-trade companies, the current year offset will need to be manually allocated between the trades, i.e. how much of the loss of each trade is used for the CTA 2010 s37 offset.

Where there is an overall non-trading deficit, the deficit is available for offset against other profits of the same period under CTA 2009, s459(1)(a) via the selector flag at the foot of the Non trading deficit column. Relief for a non-trading deficit of the current period is given after trading losses brought forward but before offset of a trading loss or non-trading deficit brought back or charges on income.

There is the option to restrict the amount of non-trading deficit offset in the period. To do this the selector flag at the foot of the column should be set to Yes and the data entry cell used to indicate the amount of the current year loss to be set off in the period. The flexibility enables a partial loss offset claim thereby leaving sufficient profits to cover non-trade charges or maximise double tax relief.

Where a claim is to be made under CTA 2009 s458(1), the amount to be excepted from set-off in the following period should be entered in the data entry cell in the Amount carried forward section. When the file is rolled forward, this amount will be separated from other carried forward deficits and automatically excluded from set-off under any other provision.

From 2010 onwards, you can amend the amount of the CTA2009 s458(1) exception claim in the following period file. To do this, enter the amount directly in the ?Add non trading deficit b/fwd but excepted from set-off this period under CTA 2009 s458(1)? data entry cell and the software will automatically post this value into the correct cell in the previous period file. Although the figure displays as a positive it must be entered as negative, i.e. with a leading minus. This is because although you are entering the figure in the current file you are actually addressing the linked cell in the previous period file which requires a negative value as it is reducing the available loss carried forward to the current file.

Note: The software will alert you that you are about to enter a value that is stored in another file, press OK to continue - for more information, see Editing direct system links to other files. For 2009 and earlier years, it is not possible to automatically update the previous period file so this has to be done manually. To assist in calculating the amount of the claim, a data entry cell is provided at the foot of the section where the amount of brought forward deficit to be off-set in the period can be entered.

Note that this data entry cell is provided purely to assist in calculating the amount of the claim, and does not interact with any other cells on this schedule. Once the amount of the claim is determined, it will be necessary to manually amend the claim in previous period file.

These data input cells should be completed manually by the user as they are not updated from Group.

Under ICTA 1988 sch 26 para 1, a UK company which is assessed to CFC tax for an accounting period may claim a reduction in the amount of that tax in respect of specified reliefs relevant allowances, which are:

(a) a trading loss of the same accounting period or carried back from a subsequent accounting period;
(b) (from 1 April 1998) a UK property loss of the same accounting period;
(c) any qualifying charitable donation;
(d) management expenses;
(e) capital allowances given by discharge or repayment of tax;
(f) an amount available to the company by way of group relief;
(g) (for accounting periods ending after 31 March 1996) a non-trading deficit on the company?s loan relationships.

These data entry cells may be used to extinguish a loss brought forward due to cessation. Any negative figure entered in these cells will reduce the loss carried forward accordingly.

Tax credits for R&D, land remediation, first year tax credits, film, video game and television production are calculated based on the figures entered on the Adjustment of profit schedule.

The investment company version of the schedule has a column for surplus capital allowances given by discharge or repayment of tax CAA 2001 s260 and surplus Management expenses. Excess management expenses over profits in an accounting period together with unrelieved business charges and a UK property loss arising because the UK property business has ceased, may be carried forward and treated as management expenses arising in the next period.

Alternatively excess management expenses, qualifying charitable donations and UK property losses can be group relieved.

The long period of account version repeats the analysis for the second stub period.

Standard sub-schedules

The Losses transferred in schedule allows the users to separately stream the losses transferred in, and to select the amount of losses that can be used in each period.

Trade losses transferred under CTA 2010, s948 may be restricted to being used only against trading profits arising from the transferred in trade.

The Ring fence expenditure supplement schedule tracks the qualifying and non-qualifying pools of losses from the Exploration Expenditure Supplement claims and carries them forward into Ring Fence and Non-Qualifying Pools.

Carry forward

On carry forward, the entries for losses brought forward in the later period are linked to the corresponding balance in the earlier period.

Error	How to solve it
Excess CAs b/f are positive	This error results from the sign conventions used within the software. Capital allowances (CA) are deducted from the profit before tax to arrive at profits chargeable to corporation tax. Capital allowances that are not claimed in the accounting period can be carried forward. These need to be entered into the software as a positive number. This error can be resolved by clicking the button.
Losses b/f are positive	This error results from the sign conventions used within the software. Any excess losses that are not set off against profits in the current year can be carried back to the previous year's computation or forward to future computations. Losses that are brought forward need to be entered into the software as a positive number. This error can be resolved by clicking the button.
Amount should be negative	This error is caused by the user allocating losses in excess of the actual amount of losses available for allocation, resulting in a negative losses figure. Check that the losses allocated are not in excess of the actual losses figure in the location of the error.
C/f cannot be negative	This error is caused by the user offsetting losses in excess of the actual amount of losses available to be offset, resulting in a negative losses figure. Check that the losses offset are not in excess of the actual losses figure in the location of the error.
Surrender exceeds amount available	This error may appear for a variety of reasons. Try checking if any losses or charges are in fact excess as shown on the Group relief details (P3) schedule in the location of the error. If you are using the Group module, check the s393A flag. You may also attempt to use the analysis of losses c/f on the Group relief matrix (B) schedule of the group module to manipulate which type of losses are surrendered.
Claim exceeds c/fwd deficit	This error arises when part or all of the unused deficits are being claimed to be excepted from set-off in the following period, and the user has excepted deficits in excess of the deficits available for carry forward.
Deficit b/fwd under CTA 2009 s458(1) cannot be utilised	This error arises when part or all of the b/fwd deficits have been claimed to be excepted from set-off in the current period, and the user has utilised deficits in excess of the b/fwd available for allocation.

Losses and allowances

Background

Developing the schedule

Completing the schedule

Standard sub-schedules

Carry forward

Related errors