Subject to a £5m deduction allowance, UK corporation tax payers may use carried-forward income losses against up to only 50% of their profits. In July, the government has published draft legislation to extend this restriction from 1 April 2020 to carried-forward capital losses. 

As part of the government's response to comments received during the consultation on this measure, it is stated that "the UK’s regime remains generous as most other countries who apply a loss restriction provide a deductions allowance of €1 or €2 million".

With help from my fellow European Tax Blog authors, I have put this statement to the test (albeit somewhat superficially as the below overview ignores much of the finer details of the relevant regimes). 

Taking a simplistic example of a company with 20m of carried-forward losses, 30m turnover and 10m of taxable profits, that company would be able to use carried-forward losses to reduce its taxable profits by:

As always, the devil is in the detail (or the numbers). The UK regime certainly has the most generous deduction allowance, benefitting those with lower taxable profits. Regimes in Italy (or also in Germany) may, however, work out better where taxable profits are higher.