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Corporation Tax: Relief for qualifying charitable donations

Publisher: Bloomsbury Professional

 

Law Stated At: 1 January 2018

4.21

Relief for qualifying charitable donations is given under CTA 2010, s 189. Such payments are not related to a company’s trading activity, so they are known as ‘non-trade’ charges. They can only be relieved against total profits of the current accounting period after any relief for trading losses, including loss relief carried back under CTA 2010, s 37(3)(b).

Example 4.6—Carry-back of trading loss: unrelieved non-trade charges

Facts

Wizard Ltd prepares accounts to 30 June each year. The company has recently changed its accounting date from 31 December.

Wizard Ltd’s results, both actual and forecast, are as follows:

Year ended 31 December 2013

Six months ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

£000

£000

£000

£000

Trade profit/(loss)

35

20

(120)

90

Property income

5

3

6

4

Chargeable gain

10

0

8

0

Charitable donations

(3)

(2)

0

0

Analysis

CTA 2010, s 37(3)(a) claim for the year ended 30 June 2015:

Year ended 30 June 2015

£000

Property income

6

Chargeable gain

8

14

Less: loss claim

(14)

Total taxable profits of the period

0

CTA 2010, s 37(3)(b) claim for the previous 12 months:

Year ended

Six months ended

31 December 2013

30 June 2014

£000

£000

Trade profit

35

20

Property income

5

3

Chargeable gain

 10

0

50

23

Less: loss claim

(25)

(23)

 25 

0

Charitable donations

 (3) 

0

Total taxable profits of the period

 22 

0

The qualifying charitable donations for the six months ended 30 June 2014 remain unrelieved, because the loss relief must be given first.

CTA 2010, s 45(4) loss carried forward against future trading profits:

Year ended 30 June 2016

£000

Trade profit/(loss)

90

Less: loss claim

(58)

32

Property income

 4

Chargeable gain

0

Total taxable profits of the period

 36

Summary of loss utilisation:

£000

Trading loss for the year ended 30 June 2015

120

Less: CTA 2010, s 37(3)(a) claim for the current year

(14)

106

Less: CTA 2010, s 37(3)(b) claim for the previous 12 months:

  • · Six months to 30 June 2014

(23)

  • · Six months to 31 December 2013

(25)

Loss carried forward (CTA 2010, s 45(4))

58

12 months to 30 June 2016

(58)

Balance of loss unrelieved

0

Example 4.7—Trading losses carried forward and back

Facts

B Ltd has carried on the same trade for many years. Total profits for the year ended 30 September 2012 were nil, so no loss can be carried back to that year. The results for the years ended 30 September 2013, 2014 and 2015 are shown below:

Year ended 30 September

2013

2014

2015

£000

£000

£000

Trade profit/(loss)

(23)

20

(25)

Loan relationship

 5

3

5

Chargeable gains

5.6

4.7

4

Charitable donations

(1)

Analysis

The losses may be relieved as follows:

Year ended 30 September

2013

2014

2015

£000

£000

£000

Trade profits

20

Deduct loss brought forward

(12.4)

7.6

Loan relationship

5

3

5

Chargeable gains

5.6

4.7

4

10.6

15.3

9

Trading losses of same period

(10.6)

(9)

Deduct trading loss carried back from year ended 30 September 2015

(15.3)

Total taxable profits of the period

nil

nil

nil

Charitable donations

1

Summary of loss utilisation:

Year ended 30 September

2013

2014

2015

£000

£000

£000

Trading loss

23

25

Charitable donations

1

23

25

Losses used in current year

(10.6)

(9)

Carried back to year ended 30 September 2014

(15.3)

Losses carried forward and used in year ended 30 September 2014

(12.4)

Balance of unrelieved losses carried forward at 30 September 2015

0.7