Corporation Tax Act 2010 section 38

Limit on deduction if accounting period falls partly within 12 month period

Section 38 limits the amount of trade loss relief that can be claimed against the profits of an earlier accounting period where that period only partly falls within the 12 months immediately before the loss-making period.

• When carrying back a trade loss under section 37, relief can be claimed against the profits of accounting periods falling within the 12 months before the loss-making period.
• If an earlier accounting period only partly overlaps with that 12-month window, the loss relief available against that period's profits is restricted proportionately.
• The maximum deduction is calculated by applying the "overlapping proportion" — the fraction of the accounting period that falls within the 12-month window — to the total profits of that period.
• Any part of the trade loss that cannot be relieved because of this restriction remains unrelieved under section 37, though it may be available for other forms of relief.