Corporation Tax Relief for Trading Losses
A company can claim Corporation Tax relief when it incurs a trading loss, a loss on the sale of a capital asset, or property income. Companies can reduce Corporation Tax by offsetting these losses against other profits or gains from the same accounting period.
Carrying Back Trading Losses
Companies can carry a trading loss back to previous years. This allows them to claim relief by offsetting the loss against earlier profits, which may result in a Corporation Tax refund.
Claiming Tax Relief
Companies can only make such claims after submitting a Corporation Tax return to HMRC. If they were trading in that period, they can carry losses back to the preceding accounting period.
Including Trading Losses in Tax Returns
Companies must include any claim for trading losses in the Company Tax Return. They calculate the trading profit or loss for Corporation Tax purposes by making the usual tax adjustments to the profit or loss shown in their financial accounts.
Offsetting Losses in Future Periods
Companies can offset qualifying losses that are not used in the current period or carried back against profits in future accounting periods. However, restrictions apply to the total amount of carried forward losses that can be offset against profits.
Summary
Corporation Tax relief offers significant benefits for companies experiencing trading losses. By understanding the rules and properly including claims in tax returns, companies can effectively manage their tax liabilities. This ensures they maximise the relief available and potentially secure refunds for previous periods.
