COVID Loss Relief Carry Back Extension

There has been a welcome extension to loss relief carry back for companies, sole traders and partnerships has been announced by HMRC. Many businesses are likely to make losses in the 2020-21 tax year ...

The Chancellor announced in his Budget that losses can be carried back for an extended period, and this has been welcome news for businesses across the entire country.

"This aims to provide a cashflow benefit to affected businesses!"

It offers an additional relief for trading losses caused by the pandemic, thereby generating repayment for tax paid for another two years. To facilitate this, loss relief carry-back can be applied against last year's losses first. For companies, incurring a trading loss in any accounting period means they can normally claim for that loss against total profits for the same period. It can also claim for unused balances of losses to be applied to profits of the preceding 12-months period. For the self-employed and partnerships, normally, a loss in a tax year means claiming for that loss in the loss making-year, the previous year, or both years.

Under the extension, companies can carry losses back to the earlier two years and is capped at £2,000,000. For the self-employed and partnerships, this can now be set against profits (from the same trade) for three years before the year in which the loss was made.

The caveat here is that the extension applies to trading losses made by companies in periods ending between the 1st of April 2020 and the 31st of March 2022. For unincorporated businesses, it's tax year 202-21 and 2021-22.

If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.