In the Finance Act 2021, the government have introduced a temporary measure allowing companies to carry back losses back more than the usual one year period to three years.
As many companies have been adversely affected by the Covid pandemic, this temporary legislation provides additional relief by allowing the losses to be carried back up to three years, this allows the company to receive a refund of corporation tax previously paid. This is how it works.
Losses of more than £2m
Previous rules apply here. Where losses exceed £2m, there is no change. Companies can only carry back unrelieved trading losses against total profits arising in the previous 12 months. Any losses that cannot be carried back will be carried forward to the next trading period.
Losses under £2m
Where losses made by a company, for example with a year ending 31 March 2022, are under £2m, such losses can be carried back to 2021 first, then 2020 and then 2019.
To take advantage of the extended loss relief claim, a claim must be made within 2 years of the end of the accounting period in which the loss being carried back arises.
Our dedicated accounting solutions team can assist with the preparation of company annual accounts and related corporation tax returns. Our team will carefully review the extent of the losses made and how these can be utilised in the most beneficial way.
Further information can be found on the following link below.
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