Companies who make losses may change their trade in order to achieve a profit. In some cases the losses made in early periods can become trapped and unusable, as tax law prevents a loss from being set against profits from a different trade.
From 1 April 2017 such restrictions on the use of losses will be lifted. A company will be able to carry forward losses to use against profits made from any activity. This is a very welcome change, particularly for small businesses with more than one activity.
Companies with profits over £5 million will be able to relieve losses against only 50% of their profits; the £5 million threshold will apply across a group of companies. Banks will be restricted to setting losses against 25% of their profits with effect from accounting periods starting on and after 1 April 2016.
