Extended Loss Carry Back

In the March 2021 budget, a new extended loss carry back was announced for both sole trade businesses and Limited companies. This means that for those businesses that have made a trading loss during the pandemic, there may be scope to carry the losses back and generate a tax refund.

Trading losses can be carried back and offset against profits for up to three years rather than just the previous period. This is a temporary extended relief and no changes have been made to the normal loss carry back rules.

Companies

  • Trading losses must first be offset against other profits of the same accounting period before they can be carried back to offset against total profits of the prior period.
  • Trading losses arising in accounting periods ending in the following periods are eligible for the extended loss carry back relief:
    • 1 April 2020 to 31 March 2021
    • 1 April 2021 to 31 March 2022

Sole Trade and Partnerships

  • Trading losses can be set against other income of the same year, the previous year or both.
  • Trading losses for the following tax years are eligible for the extended loss carry back relief:
    • 2020/21
    • 2021/22
  • Losses can be carried back against total income for the previous tax year, however the extended relief allows the losses to also be offset against trading profits of the two earlier tax years.
  • Relief will apply to both income tax and Class 4 National Insurance Contributions

For more information or to discuss how the extended loss carry back relief may affect you and your business, call us on 01480 596636.

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