Budget 2021 – Temporary Extension To Carry Back Of Trading Losses

In an effort to help businesses impacted by the pandemic, the Government has announced an extension to the trading loss carry-back rules from 12 months to three years.

This temporary extension is aimed at supporting struggling businesses by enabling them to claim a repayment of taxes for two additional years. This will be a welcome cashflow boost to businesses who have suffered trading losses as a result of the pandemic.

Both limited companies and unincorporated businesses making losses can benefit from this new legislation.

Trading losses made by companies in accounting periods ending between 1 April 2020 and 31 March 2022 and by unincorporated businesses in tax years 2020/21 and 2021/22 can be carried back for three years rather than one, with losses being carried back against later years first.

There is no limit on the amount of trading losses that can be carried back to the preceding year.

However, there will be a limit of £2,000,000 on losses for years two and three and this limit will apply separately in each loss-making year.

Groups with companies that have capacity to carry back losses in excess of a de minimis of £200,000 will be required to apportion the £2 million cap.

If you would like to discuss this further, please get in touch with our EQ Taxperts by calling one of our offices or emailing [email protected].