Draft Finance Bill 2019-20 includes legislation for a new corporate capital loss restriction

The amount of capital gains realised by companies that can be relieved by carried-forward capital losses will be limited to 50 percent from 1 April 2020. The deductions allowance of £5 million per group per year that was introduced in 2017 will also be available to cover capital gains that can be offset with carried-forward capital losses.

This measure was subject to consultation and ICAEW made representations at this point indicating concerns around the potential for trapped capital losses and further complexity around the use of losses including the need to ‘split’ accounting periods straddling April 2020.

However, the draft legislation reflects the original plans with the 50% restriction only applying to gains arising in the period after 1 April 2020. Claims can be made regarding pre-entry and connected party losses to utilise them in preference to unrestricted ‘in year’ capital losses. However, the latter will then become restricted when carried forward.