Clause 30

Part of Finance (No. 2) Bill – in a Public Bill Committee at 2:30 pm on 14 December 2021.

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Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury) 2:30, 14 December 2021

Clause 30 concerns deductions allowance in connection with onerous or impaired leases. The clause amends sections of the Corporation Tax Act 2010 to ensure that the legislation continues to work as intended. It does so by continuing to provide an exemption from the loss reform rules for companies in connection with onerous or impaired leases in specific circumstances. As the Minister said, the measure enables such companies to obtain full relief for carried-forward losses that offset profits arising from lease renegotiations where they adopt international financial reporting standard 16.

Loss reform was introduced in section 18 of schedule 4 to the Finance Act 2017, and had effect from 1 April 2017. The reform made two main changes. It increased a company’s flexibility to offset carried-forward losses either against the company’s own total profits in latter periods or in form of a group relief in a later period. Additionally, it limited the amount of profit against which carried-forward losses can be set. Each group or a company that is not part of a group has an annual deductions allowance of £5 million in profit. Carried-forward losses can be set against that amount, which is restricted to a maximum of 50% of a company’s total profits for the period. The restriction to carried-forward losses was extended to include corporate capital losses with effect from 1 April 2020. Having reviewed the clause, the Opposition do not oppose it.