It’s Tuesday! The perfect day to talk Tax.
Read this week’s short Tax snippet for doctors, dentists & landlords, to help you save money and get more organised with your tax affairs. It’s just to give you a flavour – in fact, you can read it whilst you drink your morning coffee!
This article does not constitute advice.
Professional advice should be taken prior to acting on any part of it.
Did you know you can offset company losses against profits in other trading periods, to save tax?
Making a financial loss in the initial years of a business is common. Expenses are high and it takes a while to build up the income stream to a level where the business sees a profit.
If the business sustains a loss for many years in a row, there is a requirement to assess if it is worthwhile continuing operations.
However, if the loss is a one-off, or there is a good reason, they can be used effectively to reduce tax in other periods.
Carrying back a loss
If a profit was made in the trading period prior, there is the option to offset a loss, against this profit, which typically generates a corporation tax repayment. The company needs to have continued with the same trade in both relevant accounting periods to qualify.
Carrying forward a loss
If it is not possible to carry back a loss, perhaps due to it being the first period of trading, or because there was not a profit to offset against, the loss can be carried forward instead, to utilise against future trading profits.