Changes to corporation tax loss relief

Corporation Tax
Corporation Tax is changing… and you need to know about it.

The Finance (No. 2) Act 2017 has introduced changes to the corporation tax loss regime. The rules are now more flexible for carried forward losses but restrictions to the amount of losses that can be carried forward have also been introduced. The changes apply to accounting periods beginning on or after 1 April 2017. If an accounting period sits on that date, the periods before and after are treated as separate accounting periods and its profits and losses for that period are time apportioned.

What was the position before the changes?

For periods before 1 April 2017, a company could set losses against profits of any description in the same accounting period and against profits of any description of an accounting period in the 12 months immediately preceding the period of the loss. If a trading loss had not been used in this way then the loss would be automatically carried forward and set against profits of the same trade in future periods.

What has changed?

Now, for trade losses arising in accounting periods beginning on or after 1 April 2017, they can be carried forward and set against a company’s total profits (including capital gains) in the next accounting period, subject to certain conditions being met (for example, that the trade did not become small or negligible in the accounting period in which the loss arose). The claim to set the loss against the total profits needs to be made within two years from the end of the later period. There are also similar changes to the loan relationships non-trading debit rules and the losses on intangible fixed assets rules, where the losses can now be set against total profits where they could not previously. All carried forward losses will also be available for surrender by way of group relief.

The new regime also introduces a restriction so that, from 1 April 2017, companies are only able to set losses against 50% of total profits exceeding an annual deductions allowance of £5 million. There is no restriction if profits are below the deductions allowance, so HMRC expect most small companies or groups to be unaffected. There are specific rules for single companies and groups of companies in relation to how the restriction and deduction are applied.

A targeted anti-avoidance rule (“TAAR”) has also been introduced to prevent abuse of the corporation tax loss rules. The TAAR enables HMRC to make such adjustments as are just and reasonable to prevent a loss related tax advantage arising from relevant tax arrangements.

Furthermore, the various relaxations described above (and indeed, a company’s ability to carry forward losses at all) are subject to particular limitations following a change in ownership of that company. Specialist advice should always be sought in these circumstances.

If you would like more information on how any of the changes or proposals affects you or your business or how they may apply in specific circumstances, please contact a member of our team on info@stanleycarter.co.uk or phone us 0161 205 6655 www.stanleycarter.co.uk

Ways to improve year end processes

 

Business and accounting paperwork
Continuous improvement is the key to success.

As with every New Year, January marks a particularly busy month for two sets of professionals; personal trainers and accountants. Gyms are at their busiest at the beginning of each year, packed with people wishing to stick to their New Year’s resolution to lose weight. Accountants, on the other hand, are spending many hours in the office trying to tie up year end.  As much as any financial controller tries to prepare, year end always ends up being a battle of time versus a multitude of tasks.

We live in the digital age where the importance of big data has become more noticeable than ever. Companies have come to rely on business intelligence to clean through vast data lakes in order to drive business strategy and increase profits. However, this increase in data volume impacts all departments, many of which still rely largely on manual processes. None of these are as critical to success as the financial control function. Heads of Finance will no doubt appreciate that their teams are recipients of data outputs from a variety of sources, which are then consolidated for financial and management reporting purposes; often relying on hours of dedicated data mining and formatting by overqualified accountants.

This juxtaposition between the use of highly automated business intelligence to create strategy and revenue versus the manual, laborious approach taken by the back office could not be more striking in 2018. Often, the real casualties in this scenario are data integrity and financial intelligence. For most companies, the effort required to complete key accounting and finance tasks takes away time that could be used to ensure the integrity of the data and deliver continuous management information that adds value, such as liquidity and budget forecasting.

Gaining financial control means getting ahead of the many period end processes and gaining efficiencies in the routine tasks, such as intercompany or expense management, in order to produce reports that add value to your business.

Without a doubt, gaining control requires automation. It would be easy to suggest that this could mean the end of the trusty old spreadsheet. For many this is not true, and a frightening thought.  But consider this; as data volumes grow, the limitations of spreadsheets becomes all too apparent. For many finance professionals, spreadsheets are the primary tool of choice for ad-hoc scenarios. It goes without saying that most financial controllers are highly adept at using systems such as Excel, Numbers or Lotus 123. But all too often manual processes are initially used as stop gaps which, in time, become strategic and part of the problem. This is particularly true when it comes to reporting. Unfortunately, the reliance on manual processes can, and does, lead to error.

It would be easy to dismiss the importance of spreadsheets. The simple fact is that spreadsheets are irreplaceable and will continue to be a part of every day life in finance. The trick is to limit their importance in any process and seek automation wherever possible.

Financial Control is at its busiest at the beginning of each month. The number of tasks performed during the first 3-10 days (depending on the firm’s policies) of the month to close off the previous month’s books is typically a challenge leading to countless late nights. Adopting a more streamlined, automated approach as outlined above significantly reduces time pressures and leads to a cleaner, more efficient month end close.

If you need any help with your month end accounts send us an email info@stanleycarter.co.uk or check our www.stanleycarter.co.uk

Accounting and finance professionals and the new automated roles

More than nine in ten finance and accounting professionals (92 per cent) are optimistic about increased automation in the profession.  Despite the increasing role of technology, only 12 per cent believe their job will be completely automated within the next five years, with most seeing new tools

as an opportunity rather than a threat.  

Emerging technologies are set to transform the finance and accounting sectors, with many professionals already feeling the impact on their day-to-day responsibilities, and it’s encouraging to see that, far from being intimidated or threatened by these new ways of working, the majority of professionals are excited and optimistic, believing automation will improve and expand their role in the coming years.

Couple that with a new corporate governance code that aligns the pay of top execs and workers.  The code includes requirements for UK firms to ensure board appointments are “based on merit” rather than “group think”. It also proposes giving pay committees broader responsibility and discretion over exec remuneration and is more specific on what steps need to be taken when companies encounter significant shareholder opposition. Will be essential to restoring trust in business, attracting investment and ensuring the long-term success of companies for members and wider society.

If you require support and impartial advice please email us on info@stanleycarter.co.uk or check our website for further details  http://www.stanleycarter.co.uk