Company trading losses

Corporation Tax relief may be available where a company or organisation makes a trading loss. The loss may be used to claim relief from Corporation Tax by offsetting the loss against other gains or profits of the business in the same or previous accounting period.

The loss can also be set against future qualifying trading income. Any claim for trading losses forms part of the Company Tax Return. The trading profit or loss for Corporation Tax purposes is worked out by making the usual tax adjustments to the figure of profit or loss shown in a company or an organisation’s financial accounts.

Some of the basic requirements for a trade loss to be set off against other income sources include: 

  • being within the charge to Corporation Tax 
  • the trade must be carried on a commercial basis and with a view to the realisation of profit 
  • at least some of the trade must be carried out within the UK

The rules for the Corporation Tax treatment of carried forward losses changed from 1 April 2017. The changes increased flexibility to set off carried forward losses against total profits of the same company or another company in a group whilst at the same time introduced new restrictions as to the amount of profits against which carried forward losses can be set. Any losses carried forward prior to 1 April 2017 fall under the old loss relief rules and must be handled accordingly. 

Source: HM Revenue & Customs Wed, 11 Nov 2020 00:00:00 +0100

Latest articles

Notifying cessation of self-employment

Any taxpayers that have ceased to be self-employed must notify HMRC of their change in status. There are a number of steps that must be followed if a taxpayer ceases trading as a sole trader or if they are ending or leaving a business

Submitting CIS nil monthly returns

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’ and should be

Check employment status for tax

The Check Employment Status for Tax (CEST) tool can be used to help ascertain if a worker should be classified as employed or self-employed for tax purposes in both the private and public sector.

The service provides HMRC’s view if IR35 legislation

Class 1A payment deadline

Class 1A NICs are paid by employers in respect of most benefits in kind provided to employees such as a company car. There is no employee contribution payable. If you provided taxable benefits to staff or directors your business is likely to have a