# Unlocking UK Corporation Tax Loss Relief

Learn how UK businesses can manage trading losses effectively. Explore options to offset current-year profits, claim a 12-month carry-back refund, or carry losses forward indefinitely under the Corporation Tax Act 2010.

**Published:** 2026-07-03  
**Updated:** 2026-07-05  
**Source:** https://aztajournal.com/gb/corporation-tax-loss-relief-guide

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> UK companies making a loss can offset it against current-year profits, carry it back 12 months for an immediate refund, or carry it forward indefinitely to reduce future tax bills. Specific rules apply under the Corporation Tax Act 2010.

UK companies can claim tax relief when they make a trading loss by offsetting it against other profits or claiming a refund for taxes paid in the previous year. Under the **Corporation Tax Act (CTA) 2010**, you have the choice to use these losses in the current year, carry them back, or carry them forward to future periods. The most tax-efficient method depends entirely on your current cash flow requirements and projected future tax rates.

## Key Takeaways

1. **Current Period Offset**: You can offset trading losses against other types of corporate profit, such as rental or investment income, within the same accounting period.
2. **12-Month Carry-Back**: Carry trading losses back up to 12 months to generate an immediate Corporation Tax refund from HMRC.
3. **Indefinite Carry-Forward**: Carry unused losses forward indefinitely to shield future profits from Corporation Tax.
4. **Two-Year Time Limit**: Ensure all formal loss relief claims are submitted within 2 years of the end of the loss-making accounting period.
5. **Group Relief**: Surrender current-year or carried-forward losses to profitable group members if you meet the 75% group relationship test.

## My company made a loss this year — can I carry it back or forward?

Yes, you can carry your corporate trading losses back 12 months to get a tax refund or carry them forward indefinitely to offset future profits.

Under the provisions of **CTA 2010**, you have full legislative backing to choose the direction of your tax relief. If your company paid Corporation Tax in the preceding 12-month period, carrying the loss back will trigger a direct cash repayment from HMRC. Alternatively, carrying the loss forward allows you to stand it against future profits, which is highly beneficial if your company expects to transition into a higher tax bracket.

## What is Corporation Tax loss relief?

Corporation Tax loss relief is a UK tax provision that allows companies to offset commercial trading losses against taxable profits to reduce their overall tax liability. Governed by the **Corporation Tax Act 2010**, this relief ensures businesses are only taxed on their net cumulative profitability over time, rather than being penalised for isolated loss-making periods.

## How do the main Corporation Tax loss options compare?

| Relief Option | Offset Direction | Time Limit to Claim | Primary Legislation |
| --- | --- | --- | --- |
| Current Year Offset | Against other income in the same period | 2 years from end of loss period | CTA 2010, s.37 |
| Carry-Back Relief | Back 12 months against total profits | 2 years from end of loss period | CTA 2010, s.37 |
| Carry-Forward Relief | Indefinitely against future profits | No expiration for loss pool | CTA 2010, s.45 & s.45A |
| Group Relief | Surrendered to 75% group members | 2 years from end of loss period | CTA 2010, Part 5 |

## How does carrying back a trading loss work?

Carrying back a trading loss involves offsetting the current year's loss against taxable profits from the preceding 12 months to secure a tax refund.

According to **CTA 2010 s.37**, you must first claim relief for the loss in the current accounting period before carrying any remaining balance back. The loss is set against the total taxable profits of the preceding 12-month period. If an operating period only partially overlaps with this 12-month window, under **CTA 2010 s.38**, the prior profits must be apportioned on a time basis.

Crucially, the temporary three-year pandemic-era carry-back extension introduced under the **Finance Act 2021** is permanently closed. The final date for making claims under those temporary rules was 31 March 2024. All standard carry-back claims are now strictly limited to the standard 12-month preceding window.

### What are the rules for terminal cessation losses?

If your company permanently stops trading, you can carry back your final losses up to three years to claim a refund.

1. Identify the trading losses incurred in the final 12 months of active business prior to cessation.
2. Apply the terminal loss against the profits of the immediately preceding year under **CTA 2010 s.39**.
3. Carry any remaining loss back to the prior two years, working backward chronologically.
4. Ensure the claim is submitted within the standard statute of limitations following the end of the final accounting period.

## How does carrying forward a loss work?

Carrying forward a loss involves holding the trading deficit on your balance sheet to offset it against future taxable corporate profits.

The rules governing carried-forward losses depend on when the loss was originally generated. For losses incurred prior to April 2017, **CTA 2010 s.45** dictates that they can only be carried forward to offset profits generated within the exact same trade in future years.

For losses generated after April 2017, **CTA 2010 s.45A** offers far greater flexibility. These post-April 2017 losses can be carried forward and offset against the business's total taxable profits, allowing you to use them against property, investment, or capital gains in future periods.

### Does the 50% restriction on carried-forward losses affect my company?

Yes, but only if your company makes substantial annual profits that exceed the statutory allowance limit.

- Under **CTA 2010 Part 7ZA (sections 269ZB to 269ZD)**, carried-forward losses are capped when offsetting future profits.
- The restriction caps the maximum deduction to 50% of your company's relevant taxable profits.
- A **£5 million annual deductions allowance** protects smaller enterprises from this restriction entirely.
- If your future taxable profits stay below £5 million, you are completely unaffected and can offset 100% of your profits using carried-forward losses.
- For groups of companies, the £5 million deductions allowance must be shared across the group entities.

## Can I share company losses with other group members?

Yes, corporate groups can share losses between profitable and loss-making members to reduce their collective tax liability.

Under **CTA 2010 Part 5**, companies that belong to a 75% group can surrender current-year trading losses to profitable group members. This mechanism, known as Group Relief, allows the profitable group member to reduce its taxable income immediately.

Furthermore, **CTA 2010 Part 5A** permits the surrender of carried-forward post-April 2017 losses as group relief. This allows groups of companies to allocate older, carried-forward losses across different group companies, subject to the standard group criteria and the 50% restriction rules.

## How do different types of corporation tax losses differ?

Different corporate activities yield different loss rules that restrict how those deficits can be used against other income.

| Loss Classification | Carry-Back Rules | Carry-Forward Rules |
| --- | --- | --- |
| Trading Loss | 12 months (3 years on business cessation) | Indefinitely against total profits (post-2017) or same trade (pre-2017) |
| UK Property Loss | Not permitted | Indefinitely against total profits |
| Capital Loss | Not permitted | Indefinitely against capital gains only |
| Non-Trading Loan Relationship Deficit | 12 months (against non-trading profits only) | Indefinitely against total profits |

## How to claim Corporation Tax loss relief

Claiming Corporation Tax loss relief requires making a formal declaration in your corporate tax returns within strict statutory deadlines.

1. **Complete your CT600 return**: Enter details of the trading loss in your current period return and indicate whether you are carrying it forward or back.
2. **Use commercial software for carry-backs**: To carry back a loss, use commercial CT600 software to enter the carry-back amount in Box 860 of the prior year's amended return, as HMRC's free filing service ceased supporting this in March 2026.
3. **Submit a written claim**: If the 12-month amendment window for the prior year has passed, write a formal letter to HMRC detailing your company name, the loss period, the loss amount, and how it should be allocated.
4. **Respect the 2-year deadline**: File all loss relief claims within 2 years from the end of the accounting period in which the loss occurred.

## Is it better to carry back or carry forward my losses?

The choice between carrying back or carrying forward depends on whether you value immediate cash flow over long-term tax savings.

Carrying back a loss provides an immediate cash injection by triggering a refund from HMRC for tax already paid. This option is highly beneficial for businesses facing short-term cash flow constraints or economic uncertainty.

Carrying a loss forward may yield a higher absolute tax saving if your company expects profits to fall into the marginal tax bracket. For profits between £50,000 and £250,000, where the effective tax rate can reach up to 26.5% due to marginal relief, using carried-forward losses to shelter these profits can result in greater cumulative tax savings.

### Do company ownership changes restrict carried-forward losses?

Yes, anti-avoidance rules prevent companies from buying tax losses simply to offset them against completely different business activities.

Under **CTA 2010 sections 673 to 676**, severe restrictions apply if there is a change in company ownership combined with a major change in the nature or conduct of the trade. If both events occur within a specified window, any carried-forward losses accumulated before the change of ownership will be disallowed.

### Can I carry back a trading loss against profits from more than 12 months ago?

Under standard rules, you cannot carry a trading loss back deeper than 12 months. The three-year carry-back extension has permanently closed, with the only ongoing exception being terminal loss relief under CTA 2010 s.39 when a company permanently ceases trading.

### What happens to my losses if my company goes out of business?

When a company permanently ceases to trade, any trading losses in the final 12 months can be carried back up to 3 years under the terminal loss rules. Any remaining losses that cannot be offset are permanently lost when the company is dissolved.

### How does the £5 million deductions allowance work for small companies?

The restriction caps the offset of carried-forward losses at 50% of corporate profits. However, the first £5 million of taxable profits are wholly exempt from this cap, meaning small companies with profits under £5 million can offset 100% of their profits using losses.

### Is there a time limit for how long I can carry forward Corporation Tax losses?

No, there is no expiration date on how long you can carry forward Corporation Tax losses in the UK. They will remain available on your company's tax account indefinitely until they are fully offset against future eligible profits.

### Can I claim Corporation Tax loss relief using HMRC's free online filing service?

No, HMRC's free online filing service ceased supporting comprehensive loss adjustments, including prior-year amendments, in March 2026. Companies must use commercial CT600 software or submit written claims to HMRC for these transactions.