Corporation Tax Act 2010 section 40

Ring fence trades: extension of periods for which relief may be given

Section 40 extends the carry-back period for trade losses from 12 months to 3 years where a company carrying on a ring fence trade incurs losses linked to decommissioning expenditure.

• Applies to companies making a loss in a ring fence trade (broadly, oil extraction activities) where decommissioning allowances have been received in the same accounting period
• The normal 12-month carry-back period for trade loss relief under sections 37 and 38 is extended to 3 years for the non-terminal portion of the loss
• The extended 3-year carry-back is capped at the amount of the decommissioning allowances — any excess loss above that amount reverts to the standard 12-month carry-back
• This extended relief is subject to the anti-avoidance rule in section 41, which prevents trade transfers designed to exploit the relief