Finance Act 1998

28U.K.In Chapter II of Part X of the Taxes Act 1988 (loss relief: corporation tax), before section 393 insert—

“ Losses from Schedule A business or overseas property businessU.K.

392A Schedule A losses.

(1)Where a company incurs a Schedule A loss in an accounting period, the loss shall be set off for the purposes of corporation tax against the company’s total profits for that period.

(2)To the extent that a company’s Schedule A loss cannot be set off under subsection (1), it shall, if the company continues to carry on the Schedule A business in the succeeding accounting period, be carried forward to that period and be treated for the purposes of this section as a Schedule A loss of that period.

(3)Where an investment company ceases to carry on a Schedule A business but continues to be an investment company, any Schedule A loss that cannot be used under the preceding provisions shall be carried forward to the succeeding accounting period and be treated for the purposes of section 75 as if it had been disbursed as expenses of management for that period.

(4)In this section—

(a)a “Schedule A loss” means a loss incurred by a company in a Schedule A business carried on by it; and

(b)“investment company” has the same meaning as in Part IV.

(5)The preceding provisions of this section apply to a Schedule A business only to the extent that it is carried on—

(a)on a commercial basis, or

(b)in the exercise of statutory functions.

(6)For the purposes of subsection (5)(a)—

(a)a business or part is not carried on on a commercial basis unless it is carried on with a view to making a profit, but if it is carried on so as to afford a reasonable expectation of profit it is treated as carried on with a view to making a profit; and

(b)if there is a change in the manner in which a business or part is carried on, it is treated as having been carried on throughout an accounting period in the way in which it was being carried on by the end of the period.

(7)In subsection (5)(b) “statutory functions” means functions conferred by or under any enactment (including an enactment contained in a local or private Act).

392B Losses from overseas property business.

(1)Where in any accounting period a company incurs a loss in an overseas property business (whether carried on by it solely or in partnership)—

(a)the loss shall be carried forward to the succeeding accounting period and set against any profits of the business for that period,

(b)if there are no profits of the business for that period, or if the profits for that period are exceeded by the amount of the loss, the loss or the remainder of it shall be carried forward again and set against any profits of the business for the next succeeding accounting period,

and so on.

(2)Subsections (5) to (7) of section 392A apply in relation to relief under subsection (1) above and an overseas property business as they apply in relation to relief under section 392A(1) to (3) and a Schedule A business.”.