Carry back of trading losses
The measure
Under current law companies can carry back losses to reduce profits of
the previous year. In some cases this will not lead to full use of the
losses. As previously announced in the Pre-Budget Report, companies making
trading losses in their chargeable periods ending between 24 November 2008
and 23 November 2009 who do not use up all their losses in a one-year carry
back will be able to carry back up to £50,000 of losses for up to a further
two years (taking the later year first).
The Budget extended this relief for periods ending between 24 November 2009
and 23 November 2010.
A similar extension to the loss carry-back relief will apply for income tax
purposes to unincorporated businesses.
Who will be affected?
Companies and unincorporated businesses with trading losses.
When?
For companies the new rules will apply for accounting periods ending between 24 November 2008 and 23 November 2010, while for unincorporated businesses the new rules will apply in respect of trading losses for the 2008/09 and 2009/10 tax years.
This measure should provide welcome relief to businesses making losses in the current economic climate. However, the £50,000 limit will in practice restrict its benefit.
