The Association of Taxation Technicians (ATT) has expressed concerns that changes designed to limit the amount of losses which the largest companies can set against capital gains will create additional obligations for all companies.

During the 2018 Budget, Chancellor Philip Hammond announced that the corporate income loss restriction (CILR), introduced in April 2017, will be extended to include carried forward capital losses from 1 April 2020. Those companies making capital gains will only be able to use carried forward capital losses to offset up to 50 per cent of those gains, subject to a deductions allowance of up to £5m per year.

In its response to an HMRC consultation, the ATT argued that the proposals should not create additional compliance obligations for companies that would otherwise be financially unaffected by the changes.

According to the association, bringing capital losses into the loss restriction rules “should be an opportunity” to simplify compliance obligations, particularly for those small and medium-sized companies that are not their intended targets.

Commenting, ATT technical steering group co-chair Jon Stride said: “We do not want to see companies that should be unaffected by this restriction having additional - and totally unnecessary - reporting requirements.

“We have expressed previously our concerns to HMRC regarding the existing compliance obligations for businesses of all sizes under the current corporate income loss restriction rules and are pleased that more guidance has now been released. This guidance will raise awareness of these obligations and assist companies in complying with them.”

The association recommended that a company should only be required to report the allocation of its deductions allowance between capital losses and the CILR in its tax return, if its combined profits and gains exceed the overall level of the deductions allowance for the period.

Furthermore, the ATT said that existing CILR legislation should be amended to clarify that companies are not required to state any amounts in their tax return in relation to the CILR, where their profits fall below the level of their deductions allowance for the period.

“These two suggestions taken together would remove the risk of small companies inadvertently failing to comply with a compliance requirement and suffering a financial disadvantage that goes against the government’s stated policy intention,” it said in a statement.

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