Corporation Tax Act 2010 section 937H

Ring-fenced scheme loss: treatment in subsequent periods

Section 937H explains how a company can use previously ring-fenced losses from a risk transfer scheme to offset scheme profits arising in later accounting periods.

• The section applies when a company has scheme profits in a period, the group has a pre-tax economic profit from fluctuations in the scheme rate, index or value, and the company's losses pool for the scheme is greater than nil at the start of the period.
• A portion of the losses pool (capped at the total relevant scheme profits for the period) can be brought into account as a loan relationship loss, in proportion to the share of scheme profits that arose from loan relationships.
• Similarly, a portion of the losses pool can be brought into account as a derivative contract loss, in proportion to the share of scheme profits that arose from derivative contracts.
• Bringing amounts into account means including them when calculating debits and credits under the loan relationships rules (Part 5 of CTA 2009) or the derivative contracts rules (Part 7 of CTA 2009).