Loss Relief – How does it Work & are you Entitled to it?

Keywords – Loss Relief – Corporation Tax Relief

You might have heard of other organisations enjoying the benefits of ‘loss relief’ on their corporation tax? If so, you have probably wondered whether you are entitled to these perks.

In order to make that conclusion, you must understand how the loss relief works and who is entitled to it.

Who is entitled to loss relief?

In order for loss relief to be applicable for your organisation, you must be liable to pay corporation tax in the first place. Then, the next stage is to understand the applicable areas within corporation tax.

If your company has to pay Corporation Tax and you make a loss as a result of any of the following:

  • Trading
  • The selling or disposal of a capital asset
  • Property income

Then you should be able to claim relief from Corporation Tax (providing you meet all the requirements). In order to further discuss the specific requirements, please get in touch today.

How does this work?

Put simply, to get relief from corporation tax, you offset your loss against the other profits your business makes during that same tax year.  

When it comes to calculating trading losses, where Corporation Tax relief is concerned, you need to make all the regular tax adjustments to the amount of profit (or loss) created by your company.

In the unfortunate event, you suffer a trading loss, and you cannot access loss relief in the same accounting year, you can choose to offset it against previous accounting periods. Alternatively, you can carry it forward and offset the loss against the profit you make in the future.  

However, you should be aware that if you make a loss while selling or disposing of a capital asset, they’re handled slightly differently to trading losses. As such, you are unable to offset these losses against your income. Instead, any allowable capital losses are just set off automatically, which makes things much easier to calculate and manage.

In any case, if you require any further help, get in touch today and we will take care of you.

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