In the Budget on 3 March the Government announced an extension to loss relief for businesses, in recognition of the fact that many businesses will have made losses over the past year. Currently a business can only carry a loss back to set against the profits of the previous year. The additional relief allows a business to carry a loss back to the profits of the previous three years.
For companies, the losses the extension applies to are those arising in the accounting periods ending between 1 April 2020 to 31 March 2022. After utilising the profits of the prior year, a maximum of £2 million of unused losses can be carried back and set against the profits of the earlier two years.
For unincorporated businesses, the losses are those that arise in the tax years 2020/21 and 2021/22. The maximum extended loss that may be carried back from each of the tax years 2020/21 and 2021/22 is £2m.
Over the next month we will be reviewing tax returns with losses that have already been submitted for accounting periods ending between 1 April 2020 and 31 December 2020. However, we would encourage you to check your latest tax return, and if the company made a loss that was not fully carried back please contact us to review.