Squeeze value out of your losses
If your unincorporated business made a loss in 2020/21 or in 2021/22, you will want to utilise those losses and receive a tax refund as soon as possible. Fortunately, the rules have been changed to allow you to do this.
A trading loss from 2020/21 or 2021/22 can be carried back to set against the profits of the same trade for up to three years. Losses from letting property don’t qualify for carry back, as they count as investment losses rather than trading.
When calculating the trading loss for these periods you must include as business income any covid-related grants received, such as SEISS, CJRS, or business support grants. SEISS grants are treated as income of the tax year in which they are received, irrespective of the accounting period of the business.
Income tax trading losses arising in 2020/21 will be set off in the following order:
- Total income of 2020/21 and/or 2019/20
- Trading profits of 2018/19
- Trading profits of 2017/18
For steps 2 and 3 the maximum amount of loss that can be set off against profits in those two years together is £2 million. There is no cap on the amount of loss that can be set off in step 1.
For a 2021/22 loss, the same principles apply but the years of set-off are all one year later.
Any losses not used by this extended carry-back are carried forward to set against profits of the same trade in future years.
We can help you make a stand-alone claim to carry back losses as soon as the accounting period has finished, as you do not have to wait until your 2020/21 tax return is ready to file. However, your 2020/21 tax return is due soon and it must be submitted by 31 January 2022 at the latest.
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| Make a claim to carry back your trading losses and receive a refund of tax paid in earlier years. |