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COVID Loss Relief Carry Back Extension

For both companies and unicorporated businesses ...


Posted by Helen Beaumont on 21/04/2021 @ 8:00AM

An 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 loss relief carry back extension will be welcomed by many business owners around the United Kingdom!

The loss relief carry back extension will be welcomed by many business owners around the United Kingdom!

copyright: stokkete / 123rf

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 2020-21 and 2021-22.

Until next time ...



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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.