In the Spring Budget, Chancellor Rishi Sunak announced a temporary three-year carry back of trading losses for limited companies and unincorporated traders. This is to replace the normal one-year carry back and will potentially allow loss-making businesses to obtain a refund of tax paid in those years.

The latest Finance Bill includes the legislation to implement these changes so HMRC has now issued guidance on how the rules will operate.

For unincorporated businesses, the extension applies to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020/21 and 2021/22.

For corporation tax, the new rules apply to accounting periods ending between 1 April 2020 and 31 March 2021. The £2,000,000 maximum applies separately to unused trading losses made by companies, after carry-back to the preceding year.

The £2,000,000 cap is subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between member companies.

You can find out more information about how this will work on the website.

If you have any questions about the three-year carry back of losses, please get in touch with PKB and we’ll be more than happy to help.

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