Temporary extension to the carry back period

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A temporary extension to assist incorporated and unincorporated businesses has been granted.

The carry back period has been extended so that businesses can carry trading losses back for relief against profits of earlier years to get a repayment of tax paid.

Some businesses have experienced reduced demand for their products and services, or disruption to their supply chains as a result of Coronavirus and associated restrictions.

This has led to increased trading losses in the short term for many businesses.

This measure will provide a cashflow benefit to affected businesses by providing additional relief for trading losses, thereby generating repayments for tax paid for 2 additional years.

This measure will have effect for company accounting periods ending in the period April 1, 2020 to March 31, 2022 and for tax years 2020 to 2021 and 2021 to 2022 for unincorporated businesses.

Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.

Corporation Tax

The amount of trading losses that can be carried back to the preceding year remains unlimited for companies.

After carry back to the preceding year, a maximum of £2,000,000 of unused losses will be available for carry back against profits of the same trade to the earlier two years.

This £2,000,000 limit applies separately to the unused losses of each 12 month period within the duration of the extension.

Income Tax

The amount of trading losses that can be carried back by individuals to set against profits of the preceding year remains unlimited. The current restrictions to carry back losses from a trade against general income will remain.

A separate £2,000,000 cap will apply to the extended carry back of losses made in each of the tax years 2020 to 2021 and 2021 to 2022.

The team at Ellis & Co will be actively reviewing the availability of the loss. 

Ellis & Co Chartered Accountants and Business Advisers, Chester & Wrexham - 01244 343504, info@ellis-uk.com  carry back on a case by case basis for our clients.