While the announcement refers to contrived measures it appears it will stop straight forward planning which is used to ensure a group or company can use brought forward losses against taxable profits.
“The proposed restriction on use of trapped losses in group companies stops the use of losses incurred for genuine commercial reasons in the past”, says Chris Morgan, Head of Tax Policy at KPMG in the UK.
Chris notes, “It’s easy to see why the measure has been introduced. Raising over £600m in the next five years it’s one of the biggest earners in the Budget. However the measure is really just that, more of a revenue raiser than an avoidance measure.
"While the announcement refers to contrived measures it appears it will stop straight forward planning which is used to ensure a group or company can use brought forward losses against taxable profits. Such planning is only needed due to our very complex rules which can result in genuine commercial losses being stranded.”
Chris continues, “This use of losses was provided as an example in the General Anti-Abuse Rule (GAAR) guidance of behaviour though not considered to be abusive by HMRC. This further underlines that this is really a pure revenue raising measure rather than avoidance one."
Jessica Liebmann, KPMG Corporate Communications
T: +44 (0)207 311 3245
KPMG Press Office: +44 (0) 207 694 8773
Follow us on twitter: @kpmguk #budget15
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.