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Consultation announced for changes to the rules of capital losses

Jane Mackay, Partner, Head of Tax
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The Chancellor announced a consultation to implement changes to the rules about the carry forward of capital losses by companies.

These changes restrict the use of carry forward capital losses by companies in a similar way to the 2017 changes, to the carry forward corporate trading losses and could be seen as a measure to create a simpler, more modern tax system with consistent rules.

The new rules will affect companies which have or expect to have in the future, capital losses in excess of £5 million. The changes will restrict the use of carried forward capital losses to 50% of the capital gain. The measures will include an unrestricted allowance of £5 million for capital or income losses so that the majority of companies are not expected to be affected by the changes.

The measures will be introduced in the 2019-2020 Finance Bill with effect from 1 April 2020 following a consultation on the detail of the implementation. They are likely to increase tax payable for companies that have significant brought forward capital or trading losses, and which may generate large capital gains in future.

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Jane Mackay
Jane Mackay
Partner, Head of Tax
Thames Valley