It is a fact that every business owner wants to make healthy profits. However, in most cases, businesses make losses for numerous reasons. Sometimes, the reasons are simply that the business is new, costs a lot, and has no clientele. The covid-19 pandemic also made things tough for numerous startups across the UK. Fortunately, we at TaxAdvisor UK are here to help you make things work for your business. Let us begin by telling you how to carry back trading losses from the previous years. We will also explain how you can get some relief on trading losses on income tax and corporation tax.
What are Trading Losses?
When a business has higher costs and expenses than income within the accounting period, it causes tax losses. An accountant would calculate the losses just as you calculate yearly profits.
What does “Carry Back” mean?
Generally, businesses can carry their losses from the present year to the next. This reduces the losses recorded in the previous year and reduces the profits as well. This reduced the tax bill. Upon paying the tax bills of the past year, you can then claim reimbursement of corporate tax. The carry-back period usually is twelve months. This process is not as easy as it seems. Hiring a tax accountant in the UK makes managing the documentation easier for you.
Accounting Periods that Apply to Carry Back Rules
This depends on the claim – if it is a carry-back loss for an unincorporated business (partnership or sole trader) or a limited company.
In the case of a limited company, three of extension applies to the trading losses that occur during the accounting period.
As for an unincorporated business, the extension may apply to trading losses that occurred in the past year.
In both cases, talking to a tax accountant in the UK will be the best in your interest because they can tell you the accounting period according to the year.
How do carry-back rules work?
According to the carryback rules, you need to carry back your trading losses within two years of the end of the accounting year in which the losses happened. A Tax accountant in the UK can help you with submitting the tax return. At Tax Advisor UK, our team has years of experience in this and can manage it all for you so you do not have to worry.
Can You Claim It Early?
Yes, you can claim it early. However, there are some things to keep in mind. A carry-back claim can happen when you submit the tax return. This can be a slight hitch because the time for filing the tax return may be several months away. You can start the process early to secure a claim as soon as possible. Unfortunately, making an early claim is a more laborious process. You need to approach the HMRC to request them to amend your tax return for the earlier period of profit. This will require a lot of evidence of losses and negotiations.
How TaxAdvisor UK can help
At TaxAdvisor UK , our experts will provide you 30 minutes free consultation and help you in managing all your tax and accounting work. Speak to our expert accountants, tax advisor on (0203) 5381276 or fill an online form today. We can have a consultation session over the phone, virtual or face to face meeting and will provide you no obligation fixed quote.
