CT Trading Losses (Carry-Forward + Group Relief)

Q: What happens if I miss the Self Assessment deadline?

The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.

Q: Do I need an accountant or can I file Self Assessment myself?

Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.

Q: How do payments on account work?

When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.

Q: Can my Ltd Co set a current-year loss against rental income or other non-trading income?

Yes, current-year trading losses can offset TOTAL TAXABLE PROFITS in the same accounting period, including non-trading income like property income, investment income, chargeable gains. The mechanic differs from sole-trader sideways relief: there's no per-year cap equivalent to the £50,000/25%-of-ATI limit. A Ltd Co with £200,000 trading loss + £80,000 property profit + £20,000 chargeable gains can offset the loss against the £100,000 of non-trading profits, leaving £100,000 of loss to carry back 12 months or carry forward.

Q: What's group relief + when does it help?

Group relief allows trading losses to be SURRENDERED between 75%-group-member companies in the same accounting period. Qualifying conditions: one company must beneficially own ≥75% of the other's ordinary share capital, OR both must be ≥75%-owned by a common parent. The surrendering company can surrender: trading losses, excess loan relationship deficits, excess property business losses, excess management expenses, excess qualifying charitable donations. The maximum surrender = LOWER of (available loss in surrendering company) AND (available profit in claimant company). Claimant must first apply its own losses to the fullest extent before claiming group relief. Surrendering company must consent in writing. Useful where one group company has accumulated losses + another has substantial profits, the loss-making company's loss reduces the profit-making company's CT bill.

Q: How does the 50% restriction above £5m work?

Companies with profits exceeding £5m can use carried-forward losses (POST-1 APRIL 2017) only up to £5m + 50% of profits above £5m in any single accounting period. Example: a company with £20m profits + £30m of carried-forward losses can use: £5m + (50% × £15m) = £12.5m of carried-forward losses in the year → taxable profits reduced to £7.5m. The remaining £17.5m of losses carry forward to future periods (subject to same restriction). The restriction is shared with capital losses (also 50% restricted from 1 April 2020). Most small Ltd Cos never hit the £5m threshold + the restriction doesn't bite. Large company groups + post-acquisition structures with substantial loss pools are the primary affected population.

Q: Can pre-April 2017 losses be group-relieved or used against total profits?

No, pre-1 April 2017 carried-forward trading losses retain the OLD RULES: only offsettable against profits of the SAME TRADE within the company that incurred them; CANNOT be group-relieved. Companies with substantial pre-2017 loss pools should plan carefully, those losses are essentially stuck against the originating trade. If the company's trade changes meaningfully (different products, services, customer base), the losses may become unusable. The April 2017 reform was a major liberalisation; it doesn't retroactively apply to losses already accumulated.

UK Ltd Cos with trading losses have a sequenced set of relief options: (1) **CURRENT YEAR OFFSET** against TOTAL TAXABLE PROFITS (any source, not just trading) in the same accounting period. (2) **12-MONTH CARRY-BACK** against total profits of the previous 12 months, claim within 2 years of end of loss period. (3) **TERMINAL LOSS RELIEF** on cessation, losses from final 12 months carried back against same-trade profits of the 3 PRECEDING years. (4) **CARRY-FORWARD** indefinitely, for losses incurred in accounting periods beginning on/after 1 April 2017, can offset TOTAL TAXABLE PROFITS (relaxed from old same-trade rule) + can be group-relieved. **50% RESTRICTION** above £5m: companies with profits exceeding £5m can offset carried-forward losses (post-April 2017) only up to £5m + 50% of profits exceeding £5m in any single period. Pre-April 2017 losses retain the old same-trade-only rules + cannot be group-relieved. **GROUP RELIEF** for current-period losses available between 75% group members.

Last reviewed: 23 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

What this relief is, in plain English

UK Corporation Tax loss relief is one of the most flexible corporate tax loss systems in the OECD, particularly after the April 2017 reform that relaxed carry-forward rules + introduced group relief access for losses from that date onwards. The five main mechanics (current-year offset, 12-month carry-back, terminal loss, indefinite carry-forward, group relief) give Ltd Co groups multiple tools to optimise loss usage across the corporate lifecycle. The critical reform was Finance (No.2) Act 2017 for accounting periods beginning on/after 1 April 2017. Pre-reform, carried-forward losses could only offset profits of the SAME TRADE, a restriction that made post-acquisition restructurings + diversification difficult because new business lines couldn't use historic losses. Post-reform, carried-forward losses (from 1 April 2017 onwards) can offset TOTAL TAXABLE PROFITS + can be group-relieved within 75% groups. The £5m / 50% restriction was introduced simultaneously to limit the benefit at large-company scale, preserving the flexibility for SMEs while preventing aggressive tax planning by major groups. For SME Ltd Cos, the post-2017 framework is generally favourable: losses can absorb mixed-source profits efficiently + can be passed within 75% groups via group relief or surrender. Pre-2017 loss pools remain on the old restrictive same-trade basis, companies with substantial pre-2017 losses should plan carefully around any business diversification or restructuring that might compromise the originating trade. The 12-month carry-back is universally useful for absorbing prior-year tax already paid. Terminal loss relief preserves value at exit / cessation by offering 3-year carry-back against same-trade profits.

How it works

Current year + 12-month carry-back

Current accounting period loss offsets TOTAL TAXABLE PROFITS in the same period (any source). Excess carried back 12 months against total profits of the previous accounting period (claim within 2 years of end of loss period). No cap on amount. Useful for absorbing prior-year tax already paid + generating refund cash flow.

Terminal loss relief (3-year carry-back on cessation)

Where the trade ceases, losses from the FINAL 12 MONTHS of trading can be carried back against same-trade profits of the 3 PRECEDING YEARS, extended relief window vs the standard 12-month carry-back. Useful for absorbing accumulated tax paid over the trade's profitable years before closure. Doesn't help with cessation of group companies if the trade actually continues in another group entity.

Indefinite carry-forward (post-2017 rules)

Losses incurred in accounting periods beginning on/after 1 April 2017 carry forward INDEFINITELY + can offset TOTAL TAXABLE PROFITS (relaxed from old same-trade-only). Can be surrendered as GROUP RELIEF to other 75% group companies in later periods. **50% RESTRICTION**: companies with profits exceeding £5m can use post-2017 carried-forward losses only up to £5m + 50% of profits above £5m in any single period. Pre-2017 losses retain old same-trade-only rules + no group relief access.

Group relief, 75% groups, current period only

Trading losses + excess loan relationship deficits + excess property business losses + excess management expenses + excess qualifying charitable donations can be SURRENDERED between 75% group members for current accounting period. Definition: one company beneficially owns ≥75% of the other's ordinary share capital OR both are ≥75%-owned by common parent. Maximum surrender = LOWER of available loss + available claimant profit. Claimant must first apply own losses fully before claiming group relief.

Who qualifies

UK Ltd Co (or corporate partner) within Corporation Tax charge
Genuine trading loss (no commercial-basis test for Ltd Cos equivalent to sole-trader hobby-loss test, different mechanic)
Current-year offset: no claim needed (automatic via CT600 computation)
12-month carry-back: claim within 2 years of end of loss period
Terminal loss relief: claim within 4 years of cessation
Carry-forward: post-1 April 2017 losses on enhanced basis; pre-April 2017 losses on old restricted basis
Group relief: 75% common ownership; claimant company surrenders own losses first; written consent from surrendering company

Interactions with other reliefs

R&D Tax Credits (Merged Scheme + ERIS)

R&D credit is treated as taxable trading income → adds to profits. ERIS surrendered enhanced losses for cash credit; non-surrendered portion carries forward as trading loss available for total-profits offset + group relief post-2017. Sequencing: R&D claim first, then loss surrender for cash, then carry-forward residual against future profits.

Substantial Shareholdings Exemption (SSE)

SSE-exempt gains on subsidiary disposals don't generate taxable profits → no need to absorb against losses. Conversely, SSE-qualifying disposals can't generate ALLOWABLE LOSSES either (mirror exemption). Where a subsidiary disposal generates a CAPITAL LOSS that you'd want to use, check SSE conditions, if SSE applies, the loss is denied. Some groups structure subsidiary disposals to fall just outside SSE eligibility (e.g. <12-month holding) to preserve loss usability.

Employment Allowance + Workplace Pension Employer Contributions

Both reduce taxable profits → can create or enlarge trading losses. For loss-making Ltd Cos, these reliefs increase the loss available for current-year offset, carry-back, carry-forward, or group relief. Compounding effect: combined Employment Allowance + pension + R&D + ERIS claims often generate substantial structured loss positions for early-stage / R&D-intensive companies.

Patent Box

Patent Box additional deduction reduces taxable profits → can convert profit to loss for marginal patent-revenue companies. Loss available via standard CT mechanics. Post-Patent-Box losses don't lose Patent Box election, the deduction crystallises in the period of qualifying patent income; subsequent loss usage is unaffected.

Common mistakes + audit triggers

Treating pre-April 2017 losses as offset-against-total-profits-eligible (they're not, old same-trade-only rules apply)
Ignoring the 50% restriction for groups with profits above £5m (post-2017 losses restricted to £5m + 50% above)
Group relief claimant failing to apply own losses first (sequencing enforced)
Missing 12-month carry-back deadline (2 years from end of loss period, discretionary extensions rare)
Terminal loss relief claimed within wrong window (4 years from cessation)
Confusing current-period group relief (75% group) with post-2017 carry-forward group relief (also 75% group but different statutory basis)
Restructuring trade in a way that loses pre-2017 same-trade carry-forward access (substantial business change can lose the loss pool)
Forgetting that capital losses share the 50% restriction with trading losses (combined £5m de minimis allowance)

Worked example

Tobias, Edinburgh - Director of group of 3 Ltd Cos, 1 loss-making R&D startup + 2 profitable trading subsidiaries (Current accounting period)

Tobias controls 3 Ltd Cos: HoldCo (parent, 100% of both subs), R&DCo (R&D-intensive subsidiary, current-year loss £800,000), TradeCo (profitable subsidiary, current-year profit £1,200,000). All companies have post-April 2017 accounting periods. R&DCo claimed ERIS for the R&D portion (£500k qualifying R&D → £135,000 cash credit + enhanced loss); residual non-R&D loss £300,000.

Calculation: **Step 1: R&DCo's loss position after ERIS.** Total trading loss £800,000 pre-enhancement. After 86% enhancement on £500k qualifying R&D: enhanced loss = £800,000 + £430,000 = £1,230,000. Surrendered for cash credit: £430,000 (limited to enhancement portion) × 14.5% = £62,350 cash credit received. Residual loss after surrender: £1,230,000 - £430,000 = £800,000 (effectively the pre-enhancement loss). Residual loss available for group relief: £800,000. **Step 2: Group relief surrender to TradeCo.** TradeCo current-year profit: £1,200,000. R&DCo surrenders £800,000 loss via group relief to TradeCo. TradeCo's reduced taxable profit: £1,200,000 - £800,000 = £400,000. £400k is above £250k upper limit, so full main rate 25% applies. CT on £400,000 × 25% = £100,000. **Without group relief:** TradeCo CT on £1,200,000 × 25% = £300,000. **Group relief value: £200,000 CT saving at TradeCo level.** Plus £62,350 ERIS cash credit at R&DCo level. **Combined relief value: £262,350 on £800,000 of R&D investment.** **Step 3: HoldCo position.** HoldCo has no trading activity in this scenario, pure holding. No CT effects beyond receiving dividends (FII exempt). The group structure efficiently moves R&DCo losses to TradeCo profits via group relief. **Documentation:** 1. R&DCo files AIF + CT600 with ERIS R&D supplementary pages. 2. R&DCo + TradeCo file group relief surrender claim, written consent from R&DCo confirming surrender. 3. TradeCo CT600 claims group relief of £800,000 against current-year profit. 4. HMRC processes ERIS cash credit (40 days standard) + CT positions across both companies. **Strategic note:** The post-2017 rules let TradeCo claim group relief from R&DCo even though they're in DIFFERENT TRADES, old pre-2017 rules would have restricted to same-trade carry-forward only. Post-2017 flexibility is the architectural enabler of the R&D startup + profitable subsidiary structure that funds R&D from trading profits efficiently.

Statute reference: Corporation Tax Act 2010 + Finance (No. 2) Act 2017 CTA 2010 Parts 4, 5, 5A (as amended). HMRC manual: CTM04500 onwards.

Frequently asked questions

What happens if I miss the Self Assessment deadline?+

The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.

Do I need an accountant or can I file Self Assessment myself?+

Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.

How do payments on account work?+

When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.

Can my Ltd Co set a current-year loss against rental income or other non-trading income?+

Yes, current-year trading losses can offset TOTAL TAXABLE PROFITS in the same accounting period, including non-trading income like property income, investment income, chargeable gains. The mechanic differs from sole-trader sideways relief: there's no per-year cap equivalent to the £50,000/25%-of-ATI limit. A Ltd Co with £200,000 trading loss + £80,000 property profit + £20,000 chargeable gains can offset the loss against the £100,000 of non-trading profits, leaving £100,000 of loss to carry back 12 months or carry forward.

What's group relief + when does it help?+

Group relief allows trading losses to be SURRENDERED between 75%-group-member companies in the same accounting period. Qualifying conditions: one company must beneficially own ≥75% of the other's ordinary share capital, OR both must be ≥75%-owned by a common parent. The surrendering company can surrender: trading losses, excess loan relationship deficits, excess property business losses, excess management expenses, excess qualifying charitable donations. The maximum surrender = LOWER of (available loss in surrendering company) AND (available profit in claimant company). Claimant must first apply its own losses to the fullest extent before claiming group relief. Surrendering company must consent in writing. Useful where one group company has accumulated losses + another has substantial profits, the loss-making company's loss reduces the profit-making company's CT bill.

How does the 50% restriction above £5m work?+

Companies with profits exceeding £5m can use carried-forward losses (POST-1 APRIL 2017) only up to £5m + 50% of profits above £5m in any single accounting period. Example: a company with £20m profits + £30m of carried-forward losses can use: £5m + (50% × £15m) = £12.5m of carried-forward losses in the year → taxable profits reduced to £7.5m. The remaining £17.5m of losses carry forward to future periods (subject to same restriction). The restriction is shared with capital losses (also 50% restricted from 1 April 2020). Most small Ltd Cos never hit the £5m threshold + the restriction doesn't bite. Large company groups + post-acquisition structures with substantial loss pools are the primary affected population.

Can pre-April 2017 losses be group-relieved or used against total profits?+

No, pre-1 April 2017 carried-forward trading losses retain the OLD RULES: only offsettable against profits of the SAME TRADE within the company that incurred them; CANNOT be group-relieved. Companies with substantial pre-2017 loss pools should plan carefully, those losses are essentially stuck against the originating trade. If the company's trade changes meaningfully (different products, services, customer base), the losses may become unusable. The April 2017 reform was a major liberalisation; it doesn't retroactively apply to losses already accumulated.

Last reviewed: 23 May 2026