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Extended loss carry back for businesses

The trading loss carry-back rules have been temporarily extended for both income tax and corporation tax purposes to support businesses affected by the pandemic.

For accounting periods ending between 1 April 2020 and 31 March 2022, companies may offset trading losses against total profits of the previous three years, rather than the usual one year.

The loss carried back to the extended period is subject to a cap of £2m per year. This cap also applies to groups of companies, while similar rules apply to unincorporated businesses.

Extended loss carry back claims will be required to be made in a return. However, where the claim does not , and could not, exceed £200,000, it can be made outside the tax return. This means any stand-alone or group company with losses capable of providing relief up to a maximum of £200,000 may make a claim in respect of a relevant accounting period without having to wait to submit its company tax return.

Unincorporated businesses may also make claims of up to £200,000 outside a tax return, but no online facility has yet been provided for these.

As with the current one-year carry back, the extended loss relief is limited to trading losses. The trading losses in question can be carried back against total profits of earlier accounting periods up to the capped amount.

In calculating, if the £200,000 de minimis is met, the company must assume: -

  • All capital allowance or other reliefs available to that if that would result in an increase of the loss are claimed;

  • No amounts are surrendered as group relief;

  • Losses have been carried back to the previous accounting period.



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