Due to the pandemic, many businesses made a considerable loss in the tax year 2020-21; this has impacted the profits made in the previous year and also the year before. Now, these pandemic-related trading losses can be used to generate a tax refund. Businesses can set them against profits made from the same trade up to three years earlier.

Calculating & Claiming Your Tax Refund

In order to calculate the trading loss to carry back, businesses will need to include any COVID-19 grants they received, such as SEISS, CJRS, or business support grants. Any SEISS grants will be treated as part of your income for the tax year in which they were received. The first three SEISS grants were paid in 2020-21, so these must be set off against the trading loss for that year.

If you would like to make a standalone claim to carry back losses as soon as your accounting year has finished, this is also possible, and our team can help you with this. You will not have to wait until you have all of the other details needed for your 2020-21 tax return to be able to claim the loss. The claim can set the loss against profits in all three tax years, 2019-20 to 2017-18, but the set-off must start with 2019-20 with only unused losses being carried back further.

Depending on the sector you are in, there may also be some additional conditions. All companies must show that the losses stemmed from a commercial trade which was continued with a view of making a profit. Losses from letting a property cannot be carried back at all.

Carrying back these losses does not change the figures on your tax return for the earlier years. Instead, the loss set-off creates a standalone tax credit for you to use in the current year.