Over the past 9 months we’ve seen firsthand the number of companies suffering losses on business operations due to the effects of coronavirus.
There is a form of tax relief available for businesses in this situations but this is not automatic and must be claimed. Company trading losses can be offset against company’s other income and capital gains for the same accounting period. The options companies that find themselves in such a situation are considered briefly below.
Carry Back Losses
If the claim for set-off of trading losses within the same accounting period has been made, the company may additionally claim to carry back any surplus loss against its total profits and gains in the twelve months preceding the period in which the loss arose. An added benefit of setting a trading loss off against other income in the current and previous years is that any previously paid tax may be reclaimed.
Carry Forward Losses
Any losses that still remain after they have been offset in the current year or carried back can be carried forward and offset against future profits of the business.
Deadlines to claim
There are time limits by which any claim for loss relief must be made. These claims must be made within two years of the end of the loss-making accounting period in the case of losses set off against profits and capital gains within the same period or the previous twelve months; or within two years of the end of the period for which relief is claimed in the case of losses carried forward.
