Carry Back of Trading Losses

Under usual loss relief rules, apart from special rules for opening and closing years of a business, trading losses can only be carried back and relieved against profits arising in the previous year. This is now extended to a three year carry back period, but is only available for a limited period.

For self-employed sole traders and partnerships losses arising in the 2008/09 and 2009/10 tax years will be available for a three year carry back. There is no restriction on the amount of loss that can be carried back to the preceding year, but there is a maximum loss available of £50,000 available to be carried back to the earlier two years. The same restrictions apply to companies, but the three year carry back will apply to accounting periods ending in period 24 November 2008 to 23 November 2010.

In addition, for sole traders and partnerships, although a loss may not have arisen, the profits may fall significantly and so it may be worthwhile considering a change to your year end, if this is not already 31 March or 5 April. This will enable you to utilise overlap relief from earlier years and this may create a loss that can be carried back.