What does section 357JC of the Corporation Tax Act 2010 do?

Section 357JC restricts the amount of a Northern Ireland trading loss that can be set against non-Northern Ireland profits. The restriction applies when the Northern Ireland corporation tax rate is lower than the main UK rate during the accounting period in which the loss relief is claimed, preventing an unintended tax advantage.

When does the restriction under section 357JC apply?

The restriction applies in two scenarios: first, where sideways relief is claimed under section 37 against total profits of the same accounting period; and second, where a Northern Ireland loss is carried forward against total or trade profits under sections 45A, 45B or 45F. The Northern Ireland rate must be lower than the main rate during the relief period.

How is the restricted deduction calculated under section 357JC?

The restricted deduction is calculated using the formula in section 357JJ. This formula scales down the Northern Ireland trading loss to reflect the difference between the Northern Ireland corporation tax rate and the main UK rate, ensuring the loss is proportionally reduced before being set against mainstream profits taxed at the higher rate.

Can a Northern Ireland trading loss be relieved in full without restriction?

Yes. If the Northern Ireland corporation tax rate equals the main UK rate throughout the entire accounting period in which the loss relief is claimed, no restriction applies. The loss can then be set against total profits, including non-Northern Ireland profits, in full without any scaling down under section 357JJ.

Corporation Tax Act 2010 section 357JC

Restriction on deductions

Section 357JC restricts the amount of a Northern Ireland trading loss that can be set against non-Northern Ireland profits where the Northern Ireland corporation tax rate is lower than the main rate during the period in which relief is claimed.

When a Northern Ireland trading loss is relieved against total profits (including non-Northern Ireland profits), and the Northern Ireland rate is lower than the main rate during the profit period, the deductible amount is restricted rather than allowed in full.
The restriction applies to sideways relief against current-year total profits under section 37.
The restriction also applies to carry-forward relief against total profits and trade profits under sections 45A, 45B and 45F.
In all cases, the restricted deduction is calculated according to the formula set out in section 357JJ, which adjusts the loss to reflect the difference between the Northern Ireland rate and the main rate.

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