Neil Hooton Accountancy in Bolton for all your business accounting needs. neil offers some valuable advice below about Corporation Tax losses and making the most of these before the rules change.
The temporary rules which allow companies to make more tax-efficient use of trading losses by carrying them back up to three years ceased on 23 November 2010. You can still claim this type of tax break on losses with a bit of financial wizardry!
At the peak of the credit crunch in 2008, Mr Darling announced some extra help for loss-making companies. They would be allowed to carry back trading losses they made in one year to reduce their Corporation Tax (CT) bill in the three previous years. Before this announcement, companies could only carry back losses one year, and if they hadn’t paid CT in that year it was tough luck: they could only carry forward losses until they had a CT bill to set it against. The extended carry-back rule was to be for one year only, but after pressure Mr Darling agreed to make it two. Now time is up; on November 23 2010 the tax break came to an end. But is there a way your company can still make use of it?
Although the time is now up for loss carry-back you can Change the dates of your accounting date and submit a shortened period for your Corporation tax return
If your company’s current accounting year ends after November 23 and shows losses, you can’t use the temporary tax break.
Tip. You can change your company’s accounting period to end on or before November 23 2010, and this will entitle you to use the temporary extended loss relief rules This must be done before 22 August 2011 - when the accounts become due at Companies House.
Trap. The temporary rules only apply to the three-year carry back for up to £50,000 worth of losses. So if you’ve already used the tax break for an accounting period since November 24 2008, you’ll have eaten into, or maybe completely used, all your entitlement. In the latter case it’s simply not worth changing your accounting period.
If you have any queries about using tax losses - then call Neil Hooton on 07955 646006.
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