It is a routine thing for businesses operating in today’s competitive markets to suffer a setback of declining sales or losing customers to a competitor due to varying reasons. The ultimate financial consequence of these setbacks is the loss incurred by the business. Loss relief claim for corporation tax purposes can be
This relief can be claimed in two ways. One way is to offset the loss amount against the past profit (previous accounting period) made within the same business (not just
Following example demonstrates the way adjusted loss is used for corporation tax relief:
|Profit for year ending on 30th Apr 2018||£15,000|
|Corporation tax at 19%||£2,850|
|Lose incurred for the year end on 30th Apr 2019||(£2,500)|
|Carryback of above loss to the year end on 30th Apr 2018||(£2,500)|
|New/amended amount of profit for year-end 30th Apr 2018||12,500|
|Corporation tax at 19%||2,375|
|Corporation tax repayment due||£475|
HMRC sets the time limit to claim the loss relief for corporation tax as 2 years after the end of
The process of claim is to either carry it back to April 2018 and offset it against the profits. Alternatively, you can choose to amend the original return and bring back the loss incurred in April 2019.
One vital point to be noted here is about the total amount being claimed under loss relief. In the case where
*Please note that since 1 April 2017, it is possible to claim loss from one trade and offset it against the profits from another trade, in the same accounting period, carried out under the same limited company. It was not allowed prior to 1 April 2017.
At UGS Accountants, we offer specialised advice and support to new and developing small businesses. We recognise the importance of how different each business and its needs can be. For this reason, we proactively work with you to make the structuring of business, preparation of your accounts, bookkeeping, VAT and tax return a highly beneficial process, not merely a statutory one.