Many businesses across the UK are likely to make losses in the 2020-21 tax year due to the havoc resulting from COVID disruption. Which was why the announcement in the recent Budget that losses can be carried back for an extended period was most welcome.
The policy objective aims to provide a cashflow benefit to affected businesses by providing additional relief for trading losses, thereby generating repayments for tax paid for two additional years.
Legislation will be introduced in Finance Bill 2021 to extend the period for which trading losses can be carried back against previous profits. This extension will apply to trading losses made by companies in accounting periods ending between 1 April 2020 and 31 March 2022 and to trading losses made by unincorporated businesses in tax years 2020-21 and 2021-22.
To facilitate this change, trade losses carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.
If you would like to discuss this article in more depth, please contact DSC Accountants today.