The COVID-19 pandemic has had a significant impact on the UK, even more so for business owners who have had to deal with huge losses. Typically, trading losses are able to be carried back one year to set against profits and generate a repayment of tax. However, to help companies to get back on track, the Government has announced that this can now be carried back for up to three years.
How Many Losses Can Be Carried Back?
If a company has made a loss in the accounting periods ending between the 1st April 2020 and 31st March 2022, they can now carry back as much as £2 million of extra losses for three years. There will be the average unlimited carry back for one year, then an additional £2 million for the two previous years.
Unincorporated businesses will be able to carry back losses made in the tax years 2020-2021 and 2021-2022 for three years, setting the loss against the latest year’s profits. For instance, if you are a business that has made a loss in 2020-2021, you will be able to carry that loss back against its profits made in 2019-2020, 2018-2019 and 2017-2018. You will set the loss against the profits of 2019-2020 first, then move onto the two earlier years.
You are more than welcome to talk to our accountants about your trading results from the pandemic period. If you have made a loss, taking action now could generate a useful tax repayment.