Budget 2021: Carry back of trading losses

It was announced in today’s Budget that a company or business that has suffered trading losses in an accounting period ending within the two years from 1 April 2020 to 31 March 2022 will be allowed to carry trading losses back and offset them against historic profits made in the previous three years.

The amount of trading losses that can be carried back is unlimited for the first year.  Losses for an accounting period carried back to the earlier two years will be limited to £2m. 

This will provide businesses with a greater opportunity to claim a tax refund which may provide a very welcome and timely cash injection to their finances.  However, carrying back trading losses may not necessarily be the best thing to do for a company.

Consideration should also be given to the merits of carrying those losses forward for use against future profits where the value of the loss relief may be at 25% rather than 19%.

Find out more

Visit our Budget 2021 hub for our latest commentary and to pre-order our exclusive Budget Summary and Tax Card.