FB: Corporation Tax - temporary extension to carry back of trading losses

FB: Corporation Tax - temporary extension to carry back

Trade loss carry-back period temporarily extended from one to three years for losses of up to £2 million (adjusted for groups).

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Finance Bill 2021 legislates for a temporary extension to the carry-back period from one to three years for trade losses of up to £2 million (adjusted for groups of companies). Schedule 2 Part 2 Finance Bill 2021 amends sections 37 & 38 CTA 2010 by substituting three years for 12 months. The amendments apply to trade losses arising in Accounting Periods (APs) ending in the period which begins on 1 April 2020 and ends on 31 March 2022. Similar provisions have been introduced for unincorporated businesses and are discussed in the next article. 

Claims relating to APs that end in the period which begins on 1 April 2020 and ends on 31 March 2021 (e.g. the year ended (YE) 31/12/20) are referred to as ‘2020 claims’. Claims relating to APs that end in the period which begins on 1 April 2021 and ends on 31 March 2022 (e.g. YE 31/12/21) are referred to as ‘2021 claims’.

Relief is capped at £2 million of losses per group per year. Claims for relief of more than £200,000 are referred to as non-de minimis claims and must be made in a corporation tax return for the period in which the loss is incurred. Non-de minimis 2020 claims cannot be made before 31 March 2021. Non-de minimis 2021 claims cannot be made before 31 March 2022. These restrictions do not apply to de minimis claims for losses of either year.

A non-de minimis claim made by a member of a group can only be made if a loss carry-back allocation statement has been submitted on behalf of the group and the claim is for an amount specified in that statement. Regulations will set out how to nominate a company to make the statement, its contents, the date it is required by, and when/how and by whom it can be amended.

Anti-avoidance provisions deny claims made where a company ceases to be a member of a group with a main purpose of increasing the total amount of relief given.

The temporary extension to the carry back of trading losses will also apply to unincorporated businesses for income tax purposes. For further details refer to our separate article.

For further information please contact :

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