Definition
A trading loss arises when a company's allowable trading expenses and capital allowances are more than its trading income for an accounting period. The loss can be set against other profits, carried back or carried forward to reduce Corporation Tax.
What a company can do with it
| Option | How it works |
|---|---|
| Set against other profits of the same period | The loss reduces other income and chargeable gains of the period it arose in. |
| Carry back | After the same-period claim, the rest can be set against the total profits of the previous 12 months, producing a repayment of tax already paid. |
| Carry forward | A loss not used is carried forward. A loss made on or after 1 April 2017 can be set against total profits of later periods, as long as the trade continues. |
| Group relief | A member of a group can surrender the loss to another group company. |
Things to know
- A claim to set off or carry back a loss must be made within two years of the end of the period in which the loss arose.
- When a trade ceases, the loss of the final 12 months can be carried back three years.
- Companies with profits above the £5 million deductions allowance can only cover half of the excess with brought-forward losses.
Read more: Corporation Tax losses, Carrying back a trading loss and Trading losses carried forward.