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.

 

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