Taxation (UK) · Chargeable gains for companies

Chargeable Gains: Capital Losses and Reliefs for Companies

Updated 11 October 2026 · Fact-checked

A company's capital loss can only be set against chargeable gains, never against income or trading profits. Net the loss against gains of the same accounting period first. Carry any unused loss forward indefinitely against later gains. Only the net chargeable gain is included in taxable total profits and taxed at corporation tax rates.

Understand Chargeable Gains: Capital Losses and Reliefs

A company does not pay a separate capital gains tax. Its chargeable gains are added to its other profits and charged to corporation tax. So the question for losses is how a capital loss reduces that charge.

A capital loss arises when a company disposes of a chargeable asset and the allowable cost is more than the proceeds. The loss is ring-fenced. It can only reduce chargeable gains. It cannot be set against trading profits, property income or any other income.

This is the key difference from a trading loss. A trading loss can be relieved against total profits, including gains, and can be carried forward against future trading profits. A capital loss has a far narrower use.

The order is simple. First, within one accounting period, net all gains and losses. If the result is a net gain, it goes into profits. If the result is a net loss, nothing is added for gains and the net loss is carried forward. A carried-forward loss is set against the first available later gains, and the company has no choice about how much to use. Unlike the annual exempt amount for individuals, companies have none, so there is no amount to protect.

A carried-forward loss has no time limit. It stays available until it meets a gain. A loss that is not used in the current period cannot be carried back to earlier periods.

Key rules to remember

Net gains in the period: Net chargeable gain = Chargeable gains − Allowable losses of the same period; Do this first. Only a positive result is included in profits.
Net loss in the period: Net allowable loss for the period → carried forward; If losses exceed gains, no gain is taxed and the excess is carried forward.
Use of brought-forward losses: Gain taxable = Net gains of the period − Capital losses brought forward; Brought-forward losses are set against net gains of the period in full, down to nil. They cannot go below nil.
Restriction on set-off: Capital losses can be set only against chargeable gains, not income; Never deduct them from trading profit, property income or interest.
Taxable total profits: Taxable total profits = Trading profits + other income + net chargeable gains − qualifying charitable donations; Net chargeable gains join profits and are taxed at the corporation tax rate, with no separate rate.

How to solve Chargeable Gains: Capital Losses and Reliefs questions

Use this order for any question on company capital losses. It works whether the question asks for a gain figure, a loss carried forward or the corporation tax.

1List every disposal in the accounting period and compute each gain or loss.
2Add up the gains and the losses of the period and net them.
3If the result is a net loss, carry it forward and include no gains in profits.
4If the result is a net gain, deduct capital losses brought forward, down to nil at most.
5Record any unused loss as the amount carried forward.
6Add the remaining net chargeable gain to the other profits to give taxable total profits.
7Apply the corporation tax rates or marginal relief as the question requires.

Quickest way: Three-line loss schedule

When to use it: Use this in Section B objective test cases and short Section C parts where you need only the taxable gain or the loss carried forward.

Write: Gains − Current losses = Net figure.
Take off Losses brought forward, stopping at nil.
Write Loss carried forward = unused loss, then add the taxable gain to profits.

Common mistakes in Chargeable Gains: Capital Losses and Reliefs

Setting a capital loss against trading profit
Students mix up capital losses with trading losses.
Fix: Remember that a capital loss only reduces chargeable gains. Check the word capital before you deduct.
Carrying a current-period loss back to an earlier period
Trading loss rules allow carry back, so students assume capital losses do too.
Fix: A capital loss is only used against gains of the same period or carried forward.
Using brought-forward losses before netting current-period losses
Students skip the same-period netting step.
Fix: Always net the current period's gains and losses first. Then use the brought-forward losses on any remaining net gain.
Deducting an annual exempt amount from a company's gains
The individual CGT rules, with the £3,000 annual exempt amount, are learned first.
Fix: Companies have no annual exempt amount and no separate CGT rate. Their gains are taxed as part of corporation tax.
Using more brought-forward loss than needed and creating a negative gain
Students deduct the full loss without checking the gain.
Fix: Stop at nil. Carry the remainder forward.

Worked examples

Example 1

X Ltd has a year with a chargeable gain of £80,000 and a capital loss of £30,000 on separate disposals. It also has a capital loss of £15,000 brought forward and trading profits of £200,000. Compute the taxable total profits.

Show the solution

Net the current period: £80,000 − £30,000 = £50,000.
Deduct the loss brought forward: £50,000 − £15,000 = £35,000 net chargeable gain.
Nothing is carried forward, because the loss was used in full.
Taxable total profits: £200,000 + £35,000 = £235,000.

Answer: The net chargeable gain is £35,000 and taxable total profits are £235,000. No loss is carried forward.

Example 2

Y Ltd has trading profits of £150,000 in its year. It has one disposal, which gives a capital loss of £40,000. It has no brought-forward losses. In the next year it has a chargeable gain of £55,000 and trading profits of £100,000. State the taxable total profits for both years.

Show the solution

Year 1: the capital loss cannot be set against trading profits.
Year 1 taxable total profits are £150,000. The £40,000 loss is carried forward.
Year 2: gain of £55,000 less brought-forward loss of £40,000 = £15,000 net chargeable gain.
Year 2 taxable total profits: £100,000 + £15,000 = £115,000.

Answer: Year 1 taxable total profits are £150,000 and Year 2 taxable total profits are £115,000. No loss is left to carry forward.

Exam tips

In objective tests, the trap is usually setting a capital loss against income. Reject any option that does so.
Show the three steps in Section C: net current period, use brought-forward losses, then carry forward any balance. Markers give credit for each.
State clearly that the loss is carried forward with no time limit and cannot be carried back.
Always include only the net gain in taxable total profits, and apply the rates given in the exam.

Practice questions from Chargeable gains for companies

Chargeable Gains: Capital Losses and Reliefs in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Chargeable Gains: Capital Losses and Reliefs: frequently asked questions

Can a company set a capital loss against trading income?

No. A capital loss can only be set against chargeable gains. It cannot reduce trading profits, property income or other income.

How long can a company carry forward a capital loss?

There is no time limit. The loss is carried forward until it can be set against a later chargeable gain.

What is the difference between a trading loss and a capital loss for a company?

A trading loss can be relieved against total profits, including gains, in certain cases. A capital loss can only be set against chargeable gains, in the same period or carried forward.

How are chargeable gains included in corporation tax?

The net chargeable gain is added to the company's other profits. The total is charged to corporation tax at the rates in the exam, using marginal relief where it applies.