Taking Account

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Business loss relief extended

May 2009

Companies

The loss relief carry back announced last year has been extended. Companies will now be permitted to carry trading losses arising in accounting periods ending between 24 November 2008 and 23 November 2010 back against total taxable profits of the three preceding years.

This relief will operate alongside the current 12 month carry back, which has always been available. Losses will be set against the most recent periods first, only going back to earlier periods when the profits of the later year have been exhausted.

There is a limit of £50,000 (in total) on the losses carried back to the earlier two years of the three (years 1 and 2), but no restriction on the relief against the latest year (year 3).

Claims for repayment can be made from 22 April 2009 in respect of corporation tax accounting periods which have ended.

Income tax businesses

The rules for income tax businesses are largely similar to the corporation tax rules, but there are some important key differences. The £50,000 limit and the principle of addressing more recent years first are common to both regimes.

The extended loss relief is available for losses incurred in accounting periods forming the basis periods for 2008/09 and 2009/10.

The method of relief is also different for income tax businesses, as the extended loss carry back is only against profits of the same trade and not total income.

Hilton Sharp & Clarke