Corporation Tax Support

Enter a carry-back of losses for more than one year in Corporation Tax

Following the March 2021 Budget, it was announced that trading loss carry back would be extended to three years. There are a few things to note with regards to the new loss carry back:
  • The relief extension is limited to trading losses arising in accounting periods ending between 1 April 2020 and 31 March 2022.
  • The losses are required to be set against profits of most recent years first, before carry back to earlier years.
  • Carrying back to the immediately prior year is unchanged and unlimited for trade losses, but the amount that can be carried back to the earlier two years of the extended period is subject to a cap of £2,000,000 per relevant accounting period.
  • Extended loss carry back claims will be required to be made in a return, unless the claim is for less than £200,000, in which case, a stand-alone claim could be made outside of a return.
Please see HMRC's further guidance on this: https://www.gov.uk/government/publications/extended-loss-carry-back-for-businesses/extended-loss-carry-back-for-businesses.
Version 21.2 will enable you to deal with extended loss carry back for single trade, standalone companies as follows:
  1. In Corporation Tax, go to
    Accounts | Losses, Deficits and Excess Amounts
    in the year in which the loss arises.
  2. Enter the loss you want to carry back to the immediately prior year in the
    Carried back
     column as normal. Corporation Tax will automatically populate the
    Brought Back
     column of the prior year (if it exists in the database) with this figure. You will therefore need to select the previous accounting period, go to
    Accounts | Losses, Deficits and Excess Amounts,
    and enter the amount in the
    Utilised in Period
    column with this figure to stop it from carrying forward.
  3. Back in the current year, enter the loss you want to carry back to the earlier two years via the
    Carry Back Extension...
    button, where you can enter the relevant amounts in the rows
    Carry back to CY -2
     and
    Carry back to CY -3. Carry back to CY -2
     must be populated before
    Carry back to CY -3
     becomes available. Therefore, if you have losses in CY -2, you will need to enter 0 so that you can enter the amount to set against CY -3. Please note that you can only offset a maximum loss of 2,000,000 in total against these earlier years. If you enter figures totaling more than 2,000,000 you will get an error message on closing the dialog box and will need to adjust the figures in order to continue.
  4. The
    Carried Forward
     column in the current year will show any remaining loss after offset against prior year and the extended periods.
  5. The extended loss carry back figures will not automatically populate the earlier two years. If you wish to update those computations to reflect the offset and to calculate the amount of refund due, you can open the relevant earlier year and in
    Losses, Deficits and Excess Amounts
     overwrite the
    Brought Back
     figure (with the amount being offset in that year) and also enter this amount in the
    Utilised In Period
    column. You may also need to untick
    Include validation in computation report
     to suppress messages on the computation.
The
Losses Summary
 in the computation gives a breakdown of the extended carry back.
You will not need to submit an amended return for the years you are carrying losses back to. Please see the refunds section below.
If you are dealing with multi-trade or group loss carry back where the caps may apply, Version 21.3 of Corporation Tax is expected to deal with this (expected later this year).
If you are dealing with loss carry back for multi-trades/groups, where the amount to be carried back to the two earlier years is greater than £200,000, then you may be able to follow the steps below. However, you will need to manually restrict the losses being carried back to the earlier two years, if necessary. If you are in any doubt, you may wish to wait for version 21.3.
If you are dealing with loss carry back, where the entire loss to be carried back is below £200,000, then you can either make a stand-alone claim, or you can follow the steps below.
Where a loss needs to be carried back more than one accounting period you will need to:
  1. Go to
    Accounts | Losses, Deficits and Excess Amounts
    in the year in which the loss arises.
  2. Untick
    Include validation in computation report
     to suppress messages on the computation.
  3. Enter the full loss you want to carry back in the
    Carried back
     column.
  4. Corporation Tax will automatically assume that this amount is being carried back in full to the prior year.  You will therefore need to select the previous accounting period, go to
    Accounts | Losses, Deficits and Excess Amounts
    and overwrite the amount in the
    Brought Back
    column with the desired figure or 0 if there were losses arising in that year as well.
  5. Similarly, enter or overwrite the
    Brought Back
     figure in the
    Losses
    dialogue in the previous years (with the amount you want to offset in that year) and also enter this amount in the
    Utilised In Period
    column
Refunds
A refund will
not
 be shown in the year in which the loss arises, but will appear in any year in which a loss has been brought back, provided tax paid has been entered. To enter tax paid, you need to go to
Tools | Payments | Payments
tab
|
highlight
Tax payment due
 in the white pane towards the bottom of the screen
| Add payment
 and enter the relevant details.
Because the company is not strictly due a refund in respect of the year in which the loss arises, no refund information will be posted to the CT600 in that year.  If you wish to complete these details, you will need to do so manually on the form. Open the CT600 on screen, scroll forward to the refund section,
right click | Enable Editing
 and type the relevant details on the form. They will appear red on screen (to show that they have been entered manually) but will print in black and will be submitted if the return is filed online.
Corporation Tax should automatically tick the face of the CT600 in the year in which the loss arises to indicate that a refund is due in respect of prior years.  If for any reason it does not do so, you need to go to
Company | Company Details | Other Information
 tab
|
tick that you are making a repayment claim
For an earlier period
.
Finally, you may wish to add a note confirming the refund that is expected. You can do this either from the
Notes...
button within the
Losses, Deficits and Excess Amounts
 dialog (so the note appears under the losses section in the computation) or via
Accounts | Additional Information
(so the note appears at the end of the computation).

This article applies to:

  • Product: Digita Corporation Tax