Corporation Tax relief may be available where your company or organisation makes a trading loss. A qualifying trading loss may be used to claim relief from Corporation Tax by offsetting loss against profits in previous years.
This could be a useful option for companies that have incurred significant losses. Carrying back a trading loss allows companies to seek relief by carrying them back to an earlier profit-making period resulting in a reclaim of Corporation Tax.
Usually, such a claim could only be made once a Corporation Tax return has been prepared and submitted to HMRC. In rare cases, HMRC permits carrying claims based on expected losses before the current accounting period ends. If companies request early carry back of losses from HMRC, they must provide full evidence to support their claims.
Losses can only be carried back against profits of a prior accounting period if the company was engaged in the trade during that period.
Any claim for trading losses forms part of the Company Tax Return. For Corporation Tax purposes, the trading profit or loss is determined by making standard tax adjustments to the profit or loss amount in the company’s financial accounts.
If a company ceases to carry on a trade, the preceding period is three years preceding the accounting period in which the loss is incurred. Accounting periods must be taken in order, the most recent first.