What does section 1218ZDA of the Corporation Tax Act 2009 do?

Section 1218ZDA restricts how losses arising in a separate exhibition trade before the completion period can be used. Such losses cannot be set sideways against other income, surrendered as group relief, or used in any other way. The only permitted use is to carry them forward against future profits of that same exhibition trade.

Can pre-completion exhibition trade losses be used for group relief or sideways relief?

No. Pre-completion losses made in the separate exhibition trade are ring-fenced. They cannot be set sideways against other income, surrendered as group relief to another company, or used in any other manner that would reduce a tax charge for the company or any other person. Only carry-forward against the same trade is permitted.

Are carried-forward exhibition trade losses subject to the corporate loss restriction?

No. When pre-completion losses are carried forward and deducted from future profits of the separate exhibition trade, those deductions are excluded from the corporate loss restriction rules. The normal 50% cap on carried-forward losses above the £5 million threshold does not apply, so the full loss amount can be deducted.

How is 'loss relief' defined in section 1218ZDA?

Section 1218ZDA defines loss relief very broadly. It covers any mechanism by which a loss could reduce the amount on which the company, or any other person, is chargeable to tax. This wide definition ensures no creative use of the loss outside the permitted carry-forward mechanism is allowed before the completion period.

Corporation Tax Act 2009 section 1218ZDA

Restriction on use of losses before completion period

Section 1218ZDA restricts how losses arising in the separate exhibition trade before the completion period can be used, limiting them to carry-forward relief against future profits of that same trade.

Losses made in the separate exhibition trade before the completion period cannot be used for general loss relief — they can only be carried forward against future profits of that same trade
The only permitted use of pre-completion losses is to carry them forward and set them against profits of the separate exhibition trade in a later period
Where such losses are carried forward and deducted from future trade profits, those deductions are excluded from the corporate loss restriction (the cap on deductions from trading profits)
"Loss relief" is defined broadly to include any mechanism by which a loss could reduce the tax liability of the company or any other person

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