July 6 2021

United Kingdom Publishes Updated Rules on Extended Loss Carry-Back

Source: IBFD Tax Research Platform News

On 5 July 2021, the United Kingdom updated its guidance note on the rules for making extended loss carry-back claims for companies and unincorporated businesses, as well as the procedure for making such claims.

The updated guidance includes information on the preferred method for making a de minimis claim. While extended loss carry-back claims will be required to be made in a tax return, claims below a de minimis limit of GBP 200,000 may be made outside a tax return, i.e. any stand-alone or group company with losses capable of providing relief up to a maximum of GBP 200,000 may make a claim in respect of a relevant accounting period without having to wait to submit the company's tax return.

Companies that want to make a de minimis claim outside the company's tax return can send a claim submission to HM Revenue and Customs (HMRC), for which they will need to provide relevant information, such as the unique taxpayer reference (UTR) number, the company name, the agent code (if applicable), start and end dates of the loss-making accounting period, the amount of loss, the dates of accounting periods to carry the loss back to and the relevant amounts and management accounts in PDF format, if a tax return has not been completed for the loss-making accounting period.

Note: The guidance note on extended loss carry back was first published on 3 March 2021, following the UK Government's proposal to introduce legislation as part of Finance Bill 2021 to provide a temporary extension to the loss carry back rules for trading losses of both corporate and unincorporated businesses. In particular, while the current rules allow trading losses to be carried back one year without restriction, for accounting periods ending between 1 April 2020 and 31 March 2022, this will be extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years.