Planning to minimise your tax bill? Great article of the key changes to come from the budget for the 2021/22 tax year.
Is your business eligible for a Tax Repayment?
There was great news announced in the Budget that those businesses making a loss this year will be able to carry that loss back up to 3 years and get a welcomed tax repayment!
Previously trading losses could only be carried back 12 months but this legislation increases this to 3 years. You must set the loss against the preceding year first but then it can be carried back to the previous two years, up to a maximum of £2m of losses per year.
This new enhancement applies to trading losses made by companies in accounting periods ending between 1 April 2020 and 31 March 2022 and also to trading losses made by unincorporated businesses in tax years 2020 to 2021 and 2021 to 2022.
Example
Suppose you have made a tax loss of £100,000 in the year ended 30 April 2021. Your previous trading profits have been as follows:
|
Detail |
30 April 2018 |
30 April 2019 |
30 April 2020 |
30 April 2021 |
|
Trading Profit |
£25,000 |
£45,000 |
£30,000 |
Loss £100,000 |
Previously you could only get relief for £30,000 against 2020 profits. However, the new legislation means that the remaining £70,000, which you would have previously carried forward, can now be carried back to the years ending 30 April 2019 and 2018. Doing this means your company could obtain a tax repayment of £13,300!
This temporary legislation change could potentially provide businesses with a much-needed cash boost by refunding taxes paid in previously profitable years. Why not use the cash to invest in plant and machinery and claim your 130% Super-deduction?
Speak to your tax advisor to see if you could make use of this temporary relief.
Are you prepared for the changes to the IR35 rules in April 2021?
Great article from Bevan and Buckland describing the changes can be found here.
