The trading loss carry-back rules have been temporarily extended for both income tax and corporation tax purposes to support businesses affected by the pandemic.
For accounting periods ending between 1 April 2020 and 31 March 2022, companies may offset trading losses against total profits of the previous three years, rather than the usual one year. The loss carried back to the extended period is subject to a cap of £2m per year. This cap also applies to groups of companies. Similar rules apply to unincorporated businesses.
Extended loss carry-back claims must be made in a return. However, where the claim does not, and could not, exceed £200,000, it can be made outside the tax return. This enables companies to obtain early tax repayments without waiting for the submission of the tax return for the loss-making period.
HMRC’s guidance on claiming the extended loss carry-back now includes a link for companies and their agents to submit claims of up to £200,000. Claims may be made as soon as the accounting period in which the loss occurs has ended, provided they can be quantified appropriately. A list of the information that will be required to make those claims is set out in the guidance. This includes, for example, details of the amount of loss carried back to the relevant earlier periods and draft management accounts as evidence of the loss incurred.
Unincorporated businesses may also make claims of up to £200,000 outside a tax return, but no online facility has yet been provided for these.
In calculating if the £200,000 de minimis is met, the company must assume:
all capital allowance or other reliefs available to it that would result in an increase of the loss are claimed;
no amounts are surrendered as group relief; and
losses have been carried back to the previous accounting period.
Claims exceeding £200,000 must be made in a tax return, and if made by companies that are members of a group, claims will only be valid if accompanied by a loss carry-back allocation statement. The statement must be submitted in writing by a nominated company, and separate statements are needed for financial years 2020 and 2021. The deadlines for submitting the 2020 and 2021 statements are 31 March 2023 and 31 March 2024 respectively.
Companies should not submit amended tax returns online for the earlier periods affected by the extended loss carry-back claim as the time limit for amending these returns will have passed. Instead, companies should simply ensure box 45 (claims and reliefs affecting an earlier period) on the CT600 is ticked and relevant details of the claim are included in the tax computation in the same way as for one-year carry back claims.
Gina Hetherington, associate director at Smith & Williamson
The trading loss carry-back rules have been temporarily extended for both income tax and corporation tax purposes to support businesses affected by the pandemic.
For accounting periods ending between 1 April 2020 and 31 March 2022, companies may offset trading losses against total profits of the previous three years, rather than the usual one year. The loss carried back to the extended period is subject to a cap of £2m per year. This cap also applies to groups of companies. Similar rules apply to unincorporated businesses.
Extended loss carry-back claims must be made in a return. However, where the claim does not, and could not, exceed £200,000, it can be made outside the tax return. This enables companies to obtain early tax repayments without waiting for the submission of the tax return for the loss-making period.
HMRC’s guidance on claiming the extended loss carry-back now includes a link for companies and their agents to submit claims of up to £200,000. Claims may be made as soon as the accounting period in which the loss occurs has ended, provided they can be quantified appropriately. A list of the information that will be required to make those claims is set out in the guidance. This includes, for example, details of the amount of loss carried back to the relevant earlier periods and draft management accounts as evidence of the loss incurred.
Unincorporated businesses may also make claims of up to £200,000 outside a tax return, but no online facility has yet been provided for these.
In calculating if the £200,000 de minimis is met, the company must assume:
all capital allowance or other reliefs available to it that would result in an increase of the loss are claimed;
no amounts are surrendered as group relief; and
losses have been carried back to the previous accounting period.
Claims exceeding £200,000 must be made in a tax return, and if made by companies that are members of a group, claims will only be valid if accompanied by a loss carry-back allocation statement. The statement must be submitted in writing by a nominated company, and separate statements are needed for financial years 2020 and 2021. The deadlines for submitting the 2020 and 2021 statements are 31 March 2023 and 31 March 2024 respectively.
Companies should not submit amended tax returns online for the earlier periods affected by the extended loss carry-back claim as the time limit for amending these returns will have passed. Instead, companies should simply ensure box 45 (claims and reliefs affecting an earlier period) on the CT600 is ticked and relevant details of the claim are included in the tax computation in the same way as for one-year carry back claims.
Gina Hetherington, associate director at Smith & Williamson
