Tax Tuesday this week looks at trading companies and unincorporated trading businesses which might have incurred tax losses during the period of the pandemic so far. These companies will no doubt want to explore their ability to achieve early use, i.e. early generation of tax refunds, for those losses.

As soon as Finance Bill 2021 receives Royal Assent (which we anticipate will happen next month – July 2021), the new and temporarily extended carry-back rules will become “live” insofar as claims for tax cash refunds will begin to be processed and made by HMRC.

The new rules for extended carry-back of trade loss are many and various and they naturally differ between companies and unincorporated businesses, but owners of businesses which are potentially affected should be aware, in broad terms, that;

  • tax losses arising in accounting periods which end in the period from April 2020 to March 2022 will be capable of being carried back for up to three years (instead of the usual one year limit); and
  • carry-back of “de minimis” amounts of loss, i.e. up to £200,000, arising in either (or both) of the 2019/20 or 2020/21 tax periods in question, can be claimed on a standalone basis (by a letter) after the end of the relevant accounting period but without the need for a full formal tax return at that stage.

There are specific capping rules (losses in excess of £2m) that apply, and particular rules for groups of companies, all of which can be worked through with affected clients, of course.

If your business is potentially affected and you would like to consider the prospect of earliest tax cash refund, please don’t hesitate to get in touch with your relationship principal or with Chris Barrington, Tax Partner.

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