Offsetting Trading Losses HMRC

whambam

Hi,

Can someone who used this rule in their business clear my understanding that you can claim tax relief on a trading loss for a current year offsetting it against previous or future years profits?

What if the previous year or future year has a loss?

Do they offset the loss by reducing your corporation tax or give to relief as in income for that year based on previous or next years profits?

Thanks.

anselld

Yes you can.

If you carry forward a loss you pay the tax now but get reduced tax in the future year when you make a profit.

If you carry back a loss you get reduced tax now, but you must obviously have made sufficient profit in a previous year to cover that loss.

jimmo

You mentioned corporation tax.
If your company made a loss then the loss can only be set against company profits. Sometimes the losses can be carried back to set against previous company profits. Otherwise they are carried forward available to set against future profits.
If losses are carried forward the company’s Return will typically show:
Losses brought forward
Plus losses for the year
= losses carried forward.
Company losses cannot, in any circumstances, be set against your personal income.