Corporation Tax Act 2010 section 419

Relief for expense otherwise giving rise to carried forward loss

Section 419 provides a mechanism for converting a carried forward loss into a deductible expense in the next accounting period, where the loss derives from a matching expense arising on a qualifying change in a partner company's interest in a partnership leasing business.

• Where a successor company incurs a deemed expense under section 417(5) on taking over a partnership business, and this expense contributes to a tax loss, the portion of the loss derived from that expense is not simply carried forward in the usual way but is instead converted into a deductible expense in the next accounting period.
• This conversion continues into successive accounting periods if the company keeps making losses, provided each subsequent period begins within five years of the date the qualifying change in the partner company's interest occurred, and provided no further qualifying change of ownership has taken place.
• The derived loss is uplifted using an indexation formula — DL + ((DL × D × R) / 365) — where DL is the derived loss, D is the number of days in the loss-making period, and R is the official interest rate applicable under section 826 of ICTA, preserving symmetry between the value of the original charge and the relief.
• When determining how much of a loss derives from the relevant expense, the calculation assumes that the expense in question is the very last deduction made in arriving at the loss figure.