On 14 December 2015, the First-tier Tribunal held4 that trading losses are available to be carried forward even if they are not included in a corporation tax return (as they form part of the calculation of taxable profits in the return of a subsequent year). It was the Tribunal’s view that the four-year time limit for making an assessment applied only to HMRC assessments, and not self-assessments.
On the issue of availability of the carried forward losses, the Tribunal was clear in its view that only profits (and not losses) must be “assessed”. It was therefore not necessary for the taxpayer company to include the losses in a return for the year in which they arose, in order for those losses to be available against profits of the company arising in a subsequent year.
Given that, following HMRC’s defeat in the recent decision in Higgs5, the draft Finance Bill 2016 legislation includes a provision introducing a four-year time limit for the making of income tax self-assessments, a similar change may well now be introduced in relation to corporation tax self-assessments.
The Tribunal decision can be found here.