Trading loss, cashflow gain?

Temporary change to the rules on carrying back trade losses was announced in Budget 2021. Unlocking such tax relief could be a considerable cashflow plus for businesses hit by the pandemic.

The new rules extend the period over which losses can be carried back for relief against profits of earlier years. This becomes three years rather than the usual one year. For unincorporated businesses, it affects the tax years 2020/21 and 2021/22. For companies, this covers losses arising in accounting periods ending between 1 April 2020 and 31 March 2022. 

  • Claims for a loss can be made once the extent of the loss has been established.
  • The claim must be for an amount which is quantified at the time the claim is made. This is usually done in the corporation tax (CT) return.
  • Claims that are more than the £200,000 de minimis limit will be made this way. Details of the carry back claim will be included in the computations accompanying your accounts and CT return.
  • No need to submit amended returns for earlier periods to which the relief applies for you: the claim will be treated as constituting an amendment, where relevant.
  • Claims below the de minimis £200,000 limit can be made as a stand-alone exercise, outside the corporation tax cycle.
  • Claims to the extended loss relief must be made within two years of the end of the accounting period in which the loss being carried back arises. 

We look forward to working with you to action such a claim where this is appropriate

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