Corporation Tax: Reminder about current rules for carrying back trading losses

by | Jan 11, 2023

When a business suffers losses, it is generally only able to carry back those losses for one year and offset them against previously paid tax/profits. So your business tax advisor should always look to minimise the tax due by offsetting historic losses against the earliest profit opportunity. This enables the business to benefit as early as possible from losses it has suffered.

Currently (as part of the COVID support measures) there is a temporary extension to the carry back of trading losses from one year and extending out to three years, with the carry back being against later years first. This extension applies to losses which arose in the accounting periods ending between 1 April 2020 and 31 March 2021, and 1 April 2021 and 31 March 2022.

There is no restriction on the carry back that can be made to the immediately preceding tax year, although carry back to the two earlier years is subject to a maximum carry back claim of £2 million. Each of the above two periods has a separate £2 million carry back limit. There are apportionment rules to this limit for groups.

Careful review is required of any trading losses occurring during the accounting period ending pre 31 March 2022 to ensure they are utilised in the most effective manner.

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