The rise in employers’ National Insurance Contributions (NICs) to 15 per cent is expected to materially increase employment costs, with the Centre for Policy Studies estimating that NIC liabilities for businesses paying minimum wage could rise by up to 60 per cent.
With limited fiscal support announced in the Spring Statement and cost pressures continuing, more businesses are likely to experience operational losses.
Corporation Tax relief for trading losses
If a company records a trading loss, or a loss related to capital or property income, it may be possible to offset this against income earned in the same accounting period. This can reduce the amount of Corporation Tax due.
Where applicable, losses may also be set against capital gains from the same period, although this can only be done after offsetting against trading income.
Unused losses may be carried back to earlier years, potentially resulting in a repayment of tax previously paid.
Relief on losses from shareholdings
Losses on investments in qualifying unquoted trading companies may also be deductible against general income, rather than only against gains.
This applies in specific circumstances, such as where shares become worthless or are disposed of at a loss.
This form of relief can result in tax reductions, but the rules are narrowly defined.
Eligibility depends on the nature of the company, the purpose of the investment, and the investor’s relationship to the business.
Treatment of losses during business closure
For businesses that cease trading, there is provision to offset terminal losses against profits from the preceding three financial years.
This applies only to losses incurred during the final twelve months of trading.
This relief can reduce or eliminate Corporation Tax liabilities from prior years and is available only within specific time limits following cessation.
The rules surrounding loss relief are complex and often time-sensitive.
Businesses should assess their current position, review previous periods for possible claims, and ensure proper documentation is in place.
If your company has incurred losses or anticipates doing so, we can assist in determining the most effective route to relief under HMRC’s framework.
Contact our tax team for further information and support with filing claims.
