Extended loss carry back period – are you missing out?

Date posted: 3rd Jun 2021

It was announced at the 2021 Budget that a company with trading losses incurred in accounting periods ending between 1 April 2020 and 31 March 2022 can be carried back against profits of the three years leading up to the year of the loss, rather than the usual one year.

Some accounts for these periods may have been prepared and filed before the announcement, so it may be an idea to consider the use of any losses sooner rather than later, following the announcement.

As an example, a company with a 30 June 2020 year end may have already filed accounts with HMRC and Companies House by say 31 December 2020. At that time, any losses could have only been carried back against the profits for the prior twelve months to 30 June 2019. However, up to £2m of losses can be carried back against profits of the year to 30 June 2018 and 30 June 2017, so revisions to the tax calculations may be necessary. The tax refunds may be vital for the cash flow of the company, so should be applied for sooner, rather than later.

There are similar provisions for those businesses that pay income tax (partnerships, sole traders and LLPs) so similar consideration will need to be given to any losses incurred.

If you need assistance or would like to discuss this further, please give us a call or contact us here.

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