If your business suffers a trade loss, Corporation Tax relief may be available. The loss can be utilised to seek Corporation Tax reduction by offsetting it against other business gains or profits in the same accounting period.
Where the amount of a trading loss exceeds the profits of the same accounting period, the company may claim to carry back the excess against the profits of preceding accounting periods. The preceding accounting periods are those falling wholly or partly within the preceding period.
Losses may only be carried back against profits of a preceding accounting period if the company was carrying on the trade (in which the loss was incurred) at some time in that accounting period.
Any claim for trading losses forms part of the Company Tax Return. The trading profit or loss for CT purposes is worked out by making the usual tax adjustments to the figure of profit or loss shown in the company’s or organisation’s financial accounts.
If a company ceases to carry on a trade, the preceding period is three years preceding the accounting period in which the loss is incurred. Accounting periods must be taken in order, most recent first.