Where a company makes a trading loss of no more than £200,000 in an accounting period it is now possible to claim relief for that loss even though the corporation tax return CT600 has not been submitted.
This will enable the company to carry back the loss to earlier years and obtain a repayment of tax previously paid.
HMRC will however need evidence of the loss to support the claim, in particular a PDF of the company’s management accounts for the period.
In calculating whether the loss is less than £200,000 the company must take into account any available amounts that could be claimed as capital allowances of the period (or any other claim or relief that would result in an increase in the amount of the loss) and there are other conditions.
However the extended carry back allows companies to carry back trading losses two further years in addition to the normal one year carry back. Broadly speaking, the current rules allow trading losses to be carried back one year without restriction. For accounting periods ending between 1 April 2020 and 31 March 2022, this is extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years.
Note: Losses carried back will result in a repayment of corporation tax at 19% whereas if carried forward against profits the losses may save tax at up to 25% after April 2023.
For tax saving tips contact us – call Marie Sheldrake, Tom Hulett or Mike Wilcox on 01225 445507