Trading Loss Relief Options for Companies

Corporation Tax is payable when a company makes a profit; the current corporation tax rate for limited company is currently 19%.

However, if the company suffers a trading loss; they may be eligible for relief to adjust a trading loss.

https://www.gov.uk/guidance/corporation-tax-calculating-and-claiming-a-loss

Please have a look at our Corporation tax page.

There are various options available to a limited company to deal with trading loss:

Adjust against other profits:

Trading losses can first be offset against other profits in the same year. These can include interest received and capital gains and the loss must be offset in full before considering any other types of offset.

Adjust against to group profits:

Excess losses can be surrendered to group companies which have profits in the same year, in order to reduce or eliminate their corporation tax liabilities.

Carry losses back to the earlier years:

Once a company has exhausted all the above means and there are still some losses remaining, these can be carried back and offset against total profits made by the loss-making company in the previous 12 months.

Carry forward:

Any unused losses are then automatically carried forward to offset against trading profits of future years, until they are extinguished.

Terminal loss relief:

If a company ceases to trade, it can claim a trading loss incurred in the final 12 months be carried back and offset against total profits (not just trading profits) of the last 3 years. Carried back losses are claimed against later years’ profits before earlier years’, until they are extinguished.

The companies need to be aware that anti-avoidance rules in pace for Trading losses and anti-avoidance

If you need further information; feel free to contact us.