In a perfect world, business owners would all have healthy businesses that brought in steady profits. However, this is much easier said than done. Realistically, businesses will encounter problems that may lead to losses. These losses may be attributed to the business being very young to unexpected rises in the cost of materials and goods.
There are many factors that come into play when it boils down to how successful or unsuccessful a business is. Throw in the effects of the global COVID-19 pandemic into the mix, and it will make it even more difficult for a business to stay afloat! The good news is that businesses that have been severely affected by the pandemic can file to get help.
Relief for Trading Losses on Corporation and Income Tax: FAQs
What are trading losses?
Trading losses, as its name suggests, refer to a situation where a business has a larger amount of expenses than its income for a certain accounting period. The computation for this is similar to the way you compute your annual profits.
How can you “carry back” a trading loss?
This is done when businesses that are experiencing negative profit numbers will use the data from previous years in their tax computations for the bad year. This means that they can take their expenses from this year and carry back the trading losses and put them against the profits made the previous year.
This will mean that the profit from the previous year will be reduced. However, having a lower profit will also come with a lower tax bill. This is good news because since the tax for the previous year had already been paid, the business will be able to collect reimbursement of the Corporation Tax or Income Tax it previously paid.
How do I make a claim?
The claim will be submitted as a part of your company tax return or an amended tax return. However, you may also opt to file a standalone claim. With this, you will need to include the name of your business, the total amount of the loss, and the affected tax period that the loss occurred.
Getting Access to the Available Help
If you are confused as to how to begin this process and are stressed because of the effects of the pandemic and how they have affected your business, the services of a tax accountant will help you get all the information about carry-back rules. These professionals will help you understand everything about carryback and how it can benefit your business.
Conclusion
It is understandable that your business did not do as well as you had hoped because of the COVID-19 pandemic. With lockdowns happening left and right, businesses everywhere have been trying their best to cope. The government understands this and wants to give your business the best chance at survival so that you can get back on your feet before this pandemic comes to an end. If you have not already, it is crucial that you find a skilled accountant that will be able to help you file a claim.
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