Changes to the trading loss carry back rules
Companies and unincorporated businesses making trading losses will have
an additional way to relieve these losses.
Current rules allow trading losses to be relieved in a number of ways, including against income in the current year or carried back to the preceding year and the Government is now introducing a further mechanism for relief. It will now be possible to carry back trading losses for three years, where they have not been fully utilised by a single-year carry back claim.
For companies the new rules will apply for accounting periods ending between 24 November 2008 and 23 November 2009, while for unincorporated businesses the new rules will apply for the tax year 2008-09.
Losses must be set against profits from the most recent accounting period first. The amount of losses that can be carried back to the preceding year remains unlimited. After carry back to the preceding year, a maximum of £50,000 of the balance can be claimed by carrying back to the earlier two periods.
The additional means of obtaining relief is welcome but the £50,000 limit and temporary nature of the relief will in practice restrict its benefit.