Claiming Corporation Tax losses

Source: HM Revenue & Customs | | 10/11/2022

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 accounting period.

It is also possible to carry a trading loss back in order to claim relief from Corporation Tax by offsetting the loss against profits in previous years. Carrying back a trading loss allows companies to seek relief for the losses by carrying them back to an earlier profit-making period resulting in a reclaim of Corporation Tax.

Usually, such a claim can only be made once a Corporation Tax return has been prepared and submitted to HMRC. 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 Corporation Tax 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.

It is also possible for certain losses that a company has not used in the same accounting period or carried back to be offset against profits in future accounting periods.