New Company Carry Back Rules
Updated guidance on claiming relief
HMRC have updated their guidance on claiming relief for company trading losses to take account of the extended carry back announced in the Spring Budget and now legislated in the Finance Act 2021. The guidance sets out the details required by HMRC where a company is making a claim for loss relief in advance of submitting its CT600 corporation tax return, where the loss is no more than £200,000.
In the Budget 2021, the Chancellor announced a temporary extension to the carry back of trading losses from one year to 3 years, for losses up to £2,000,000 for accounting periods ending between 1 April 2020 and 31 March 2022. Losses must be set against profits of most recent years first before carry back to earlier years.
There is no change to the current one-year unlimited carry back of trade losses, however, for the extended relief, the amount of loss that can be carried back to the earlier 2 years of the extended period is capped for each of those 2 years. This is a cap of £2,000,000 of losses for all relevant accounting periods ending in the period 1 April 2020 to 31 March 2021 (financial year 2020).
Groups will be subject to a group cap of £2,000,000 for each relevant period.
Extended loss carry back claims will need to be made in a return, however, claims below a de minimis limit of £200,000 may be made outside a return. This means that any stand-alone or group company with losses capable of providing relief up to a maximum of £200,000 may make a claim in respect of a relevant accounting period without having to wait to submit its company tax return.
If you want to make a de minimis claim outside the company tax return, you can send a claim submission to HMRC.
You will need to give relevant information such as:
We can of course advise you on the best use of trading losses. Losses carried back will result in a repayment of corporation tax at 19% whereas if carried forward against profits the losses may save tax at up to 25% after April 2023.
More information about the changes can be found in the Extended Loss Carry Back for Businesses.