Carrying company losses back

Corporation Tax relief may be available where your company or organisation makes a trading loss. A qualifying trading loss may be used to claim relief from Corporation Tax by offsetting the loss against profits in previous years.

This could be a useful option for companies that have incurred significant losses. Carrying back a trading loss allows companies to seek relief by carrying them back to an earlier profit-making period resulting in a reclaim of Corporation Tax.

Usually, such a claim could only be made once a Corporation Tax return has been prepared and submitted to HMRC. However, in exceptional cases HMRC will allow claims to be carried back based on anticipated losses before the end of a current accounting period. Companies making a submission to HMRC requesting the early carry back of losses would need to provide HMRC with full evidence to support such claims.

Losses may only be carried back against profits of a preceding accounting period if the company was carrying on the trade (in which the loss was incurred) at some time in that accounting period.

Any claim for trading losses forms part of the Company Tax Return. The trading profit or loss for Corporation Tax purposes is calculated by making the usual tax adjustments to the figure of profit or loss shown in the company’s or organisation’s financial accounts.

If a company ceases to carry on a trade, the preceding period is three years preceding the accounting period in which the loss is incurred. Accounting periods must be taken in order, the most recent first.

Source:HM Revenue & Customs| 31-07-2023

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