The Finance Act 2017 changed rules around how corporate losses can be relieved.
The losses arising from 1 April 2017 onwards can be set off in a far more flexible fashion than earlier losses. For example trading losses may be used against property income. This means that the losses brought forward from earlier periods need to be kept separate, so they don’t get mixed up with later losses.
In addition, where losses arise within a group there are restrictions on whether certain non-trading losses can be surrendered to other companies in the group, which would include excess management expenses and UK property business losses.
It appears that not all corporation tax software was correctly updated to reflect these changes. The problem appears to be with the CT600 return where there are brought forward losses declared in certain boxes.
The corporation tax software is producing the correct figure of taxable profits or losses, but this may not agree to the CT600 if those boxes have been used.
HMRC has written to companies which have used the affected software. If you have used affected CT software, you will get a letter from HMRC which explains that it will ignore the incorrect entries in the CT600, and just refer to the tax computation. If you are happy for HMRC to do this, you don’t have to do anything.
If you need help in relation to this, please contact us.
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