Corporation Tax Act 2010 section 269ZK

Meaning of "shock loss": requirement to make a claim

Section 269ZK allows insurance companies to claim that carried-forward losses arising during a solvency shock period should be treated as "shock losses", which receive more favourable treatment under the corporation tax loss restriction rules.

• An insurance company may claim that a loss arising in an accounting period beginning on or after 1 April 2017 is a "shock loss", provided the loss can be carried forward and the accounting period overlaps with a 12-month solvency shock period specified in the claim.
• Where the entire accounting period falls within the specified solvency shock period, the full loss qualifies as a shock loss; where only part of the accounting period overlaps, the loss is time-apportioned using the formula P/N (days in common divided by total days in the accounting period).
• A company may specify more than one 12-month solvency shock period in its claim, but the periods must not overlap with each other, ensuring the same days are not counted twice in any time apportionment.
• The claim must be made within two years of the end of the loss-making accounting period, unless HMRC allows a longer period; and if the standard time apportionment produces an unjust or unreasonable result, the apportionment should instead be made on a just and reasonable basis.