Where a company has trading losses, non-trading loan relationship deficits, or management expenses brought forward from previous periods, the way in which they can be utilised is restricted.
A trading loss can only be set against future profits from the same trade; non-trading loan relationship deficits can be carried forward and set against non-trading profits; surplus management expenses are treated as management expenses of subsequent periods which are set off first against total profits.
Companies have used various means of refreshing losses from previous periods so as to broaden the ways in which those losses can be used. These typically create new profits against which the old losses can be offset, and generate fresh losses that can be offset against total profits in the year or group relieved.
Provisions are being introduced with effect from 18 March 2015 to prevent companies from artificially refreshing losses. There are transitional rules for accounting periods which straddle that date, where two notional accounting periods are created.
This is an anti-avoidance measure designed to prevent companies from artificially enhancing the use of brought forward losses.