Company Losses: Trading vs Non-Trading on CT600
Your company lost money this year. That's never fun — but there's a significant upside: UK corporation tax law gives companies several ways to use those losses to reduce tax, either now or in the future.
The catch? Not all losses are created equal. HMRC distinguishes between trading losses, non-trading loan relationship deficits, and capital losses — and each type follows different rules for how (and when) it can be relieved.
Get this wrong and you could miss out on a refund, carry losses to the wrong period, or trigger an HMRC enquiry. This guide explains every type of company loss, how each is treated on your CT600, and the most tax-efficient way to claim relief.
The Three Types of Company Loss
| Loss type | What it covers | Main legislation | CT600 box |
|---|---|---|---|
| Trading losses | Losses from the company's trade or business activity | CTA 2010, Part 4 | Box 155 (negative), relief claimed in Boxes 275-285 |
| Non-trading loan relationship deficits | Losses on interest and financing costs not connected to a trade | CTA 2009, Part 5 | Box 172 (negative), relief in Boxes 260-275 |
| Capital losses | Losses from selling capital assets (shares, property, goodwill) | TCGA 1992 | Box 199, relief via Box 200 |
Each category has its own relief mechanisms and limitations. You cannot mix them freely — a trading loss can't simply be offset against a capital gain, for example, without going through specific relief claims.
Trading Losses Explained
A trading loss arises when your company's allowable expenses exceed its trading income in an accounting period. This is the most common type of company loss and offers the most flexible relief options.
How trading losses arise
Common causes include:
- Start-up costs exceeding early revenue — particularly in the first year of trading
- Large capital allowances — claiming the full Annual Investment Allowance on equipment purchases can create or deepen a loss
- Bad debts written off — customers who don't pay
- Exceptional costs — restructuring, legal disputes, stock write-downs
- Revenue downturn — the business simply earned less than it spent
Relief options for trading losses
You have four ways to use a trading loss, and they can be combined:
1. Carry forward against future trading profits (automatic)
The default. Unused trading losses carry forward indefinitely and are set against the first available trading profits of the same trade.
- No time limit — losses from 2020 can still be used in 2030
- Same trade only — if you change what your company does, losses from the old trade may not be available
- Must be used against first available profits — you can't skip a profitable year and carry the loss further
For losses arising after 1 April 2017, carry-forward losses set against total profits (not just trading profits) are subject to a £5 million deductions allowance plus a 50% restriction on profits above that level. For most small companies this is irrelevant — it only affects companies with profits exceeding £5 million.
2. Set off against total profits of the same period
Claim under s.37 CTA 2010. Instead of carrying the loss forward, you offset it against all of the company's profits in the same accounting period — including non-trading income, capital gains, and bank interest.
- All-or-nothing — you must claim the full trading loss (you can't claim a partial amount)
- Reduces other income — useful if you have capital gains or bank interest that would otherwise be taxed
- Can create a wasteful claim — if the trading loss exceeds total profits, the excess can't be used in the current period (but can be carried forward)
3. Carry back to the previous 12 months
Claim under s.37(3)(b) CTA 2010. After claiming against the current period's total profits (option 2), any remaining loss can be carried back and set against total profits of the preceding 12 months.
- Generates a refund — if your company paid corporation tax last year and now has losses, you can reclaim the overpaid tax
- 12-month limit — you can only go back one year (the preceding accounting period must fall within 12 months before the start of the loss-making period)
- Must claim current-year relief first — carry-back is only available for the excess after current-year offset
Example: Trading loss relief
Your company has a year-end of 31 March 2026. Results:
| Period | Trading profit/(loss) | Bank interest | Capital gains | Total |
|---|---|---|---|---|
| YE 31 March 2025 | £30,000 | £1,000 | £0 | £31,000 |
| YE 31 March 2026 | (£50,000) | £2,000 | £5,000 | (£43,000) |
Step 1: Claim s.37 relief — offset £50,000 trading loss against total profits of YE March 2026 (£7,000 of other income). This wipes out the £2,000 bank interest and £5,000 capital gain. Remaining loss: £43,000.
Step 2: Carry back £31,000 to YE March 2025 — offset against total profits, generating a corporation tax refund. Remaining loss: £12,000.
Step 3: £12,000 carries forward to YE March 2027 and beyond.
4. Group relief
If your company is part of a group, trading losses can be surrendered to other group companies under group relief. The recipient company offsets the loss against its own profits, reducing the group's overall tax bill.
Non-Trading Loan Relationship Deficits
A non-trading loan relationship deficit (NTLRD) arises when your non-trading interest expenses exceed your non-trading interest income. This is less common for small companies but occurs when:
- The company has borrowed to buy investments (not for the trade) and pays interest on the loan
- Interest on bank accounts doesn't cover interest costs on non-trading loans
- The company has non-trading financing costs that exceed non-trading income
Relief options for NTLRDs
NTLRDs have their own relief mechanism under s.457 CTA 2009:
- Set off against total profits of the same period — similar to trading losses, but the claim is made under different provisions
- Carry back against non-trading loan relationship profits of the previous 12 months only — unlike trading losses, you can only carry back against the same type of income
- Group relief — surrender to group companies
- Carry forward — against total profits of future periods (for deficits arising after 1 April 2017) or non-trading profits only (for earlier deficits)
Key difference from trading losses
The carry-back for NTLRDs is more restrictive — you can only carry back against non-trading loan relationship profits, not total profits. This matters if the previous year's profits were mainly from trading.
Capital Losses
Capital losses arise when your company sells a capital asset — shares, property, goodwill, or other non-trading assets — for less than its allowable cost.
Relief rules for capital losses
Capital losses are the most restricted type:
- Can ONLY be set against capital gains — never against trading profits or other income
- Carry forward indefinitely — unused capital losses carry forward against future capital gains
- Cannot be carried back — unlike trading losses, there is no carry-back provision for capital losses
- Cannot be surrendered as group relief — capital losses stay with the company that incurred them
- No current-year offset against income — even if the company has trading profits, capital losses can't touch them
Example
Your company sells shares in a subsidiary for a loss of £20,000. In the same year, it has trading profits of £100,000 and capital gains of £5,000 from selling equipment.
- Capital loss of £20,000 set against capital gain of £5,000 = £5,000 relieved
- Remaining £15,000 capital loss carries forward
- The £100,000 trading profit is taxed in full — the capital loss provides no relief against it
Reporting Losses on Your CT600
Each loss type has specific boxes on the CT600:
Trading losses
- Box 155 — Enter trading profit or loss. A loss is shown as a negative figure
- Box 275 — Trading losses brought forward from earlier periods
- Box 280 — Trading losses carried back to the previous period
- Box 285 — Trading losses carried forward to later periods
Non-trading loan relationship deficits
- Box 172 — Non-trading loan relationship profits or deficit (negative = deficit)
- Box 260 — NTLRD brought forward
- Box 265 — NTLRD set against current period profits
- Box 270 — NTLRD carried back
Capital losses
- Box 199 — Chargeable gains
- Box 200 — Capital losses (current year and brought forward, set against gains)
The tax computation
Your CT600 tax computation must clearly show how losses have been used. HMRC expects a reconciliation showing:
- Losses brought forward from previous periods
- Losses arising in the current period
- Losses used in the current period (by type of relief)
- Losses carried forward to future periods
Common Mistakes with Company Losses
1. Using capital losses against trading profits
This is the most common error. Capital losses can only offset capital gains. If you have £50,000 in capital losses but no capital gains, the losses carry forward — they don't reduce your trading profit.
2. Forgetting to claim loss relief
Loss relief isn't always automatic. While carry-forward happens by default, carry-back and current-year claims must be actively made by ticking the relevant boxes on the CT600 and including the claim in the return. If you don't claim, you don't get the relief.
3. Claiming carry-back without current-year relief first
To carry back a trading loss, you must first claim s.37 current-year relief. You can't skip the current year and carry the loss back directly. This catches out companies that want to preserve current-year reliefs (like capital allowances) but carry losses back.
4. Missing the time limit
Loss carry-back claims for trading losses must be made within 2 years of the end of the loss-making period. Miss this deadline and the carry-back option is gone — the loss can only be carried forward.
5. Confusing trading and non-trading losses
Interest income and expenses must be correctly classified as trading or non-trading. Getting this wrong means losses end up in the wrong category, potentially leading to incorrect relief claims and HMRC challenges.
Strategic Loss Planning
When to carry back vs carry forward
| Carry back | Carry forward |
|---|---|
| Generates an immediate cash refund | Reduces future tax bills |
| Best when the previous year had higher profits/tax rates | Best when you expect higher profits (or higher tax rates) in the future |
| Must be claimed within 2 years | No time limit |
| Requires current-year offset first | Happens automatically |
For most small companies making a one-off loss, carry back is usually better because of the time value of money — a refund now is worth more than a tax saving in the future.
Impact on the £50,000 threshold
If your company's profits are near the small profits rate threshold of £50,000, loss relief can bring profits below this level, reducing the effective tax rate from 26.5% to 19%. This can make the tax saving from losses disproportionately valuable.
How Taxpipe Handles Company Losses
Filing a CT600 with losses is more complex than a straightforward profitable return. Taxpipe guides you through:
- Loss identification — The system identifies trading losses, NTLRDs, and capital losses from your inputs
- Relief optimisation — Taxpipe suggests the most tax-efficient relief claims based on current and prior period figures
- Correct CT600 mapping — Losses are routed to the right boxes automatically
- Carry-forward tracking — Loss memoranda are maintained for future periods
Frequently Asked Questions
Can I carry trading losses back more than one year?
Generally, no — trading losses can only be carried back 12 months. However, there are exceptions: terminal losses (when a company ceases trading) can be carried back 3 years, and temporary COVID-19 provisions allowed extended carry-back for losses in certain periods (these have now expired).
Do losses expire?
Trading losses and capital losses can be carried forward indefinitely — they don't expire. However, there are anti-avoidance rules that can restrict losses if there's a change in ownership combined with a major change in the nature or conduct of the trade (s.673 CTA 2010).
Can I choose how much loss to carry back?
For trading losses, the carry-back claim is for whatever remains after the mandatory current-year offset. You can't carry back a specific portion while keeping the rest for carry-forward — the legislation requires current-year relief first, then carry-back of the excess (or part of the excess).
What happens to losses if my company is dissolved?
Unused losses are lost when a company is dissolved or struck off. If you're planning to close your company, use any available losses first — particularly by carrying back against the preceding year's profits.
Are there limits on how much loss relief I can claim?
For most small companies, no practical limit applies. The £5 million deductions allowance and 50% restriction on carried-forward losses only affects companies with profits exceeding £5 million. Below that threshold, you can use losses in full.
Can I transfer losses between companies?
Only through group relief, and only for certain loss types. Trading losses and NTLRDs can be surrendered to 75% group companies. Capital losses cannot be transferred between companies at all.