If you run a business as a Limited Company, you may sometimes make a loss. 

This may be due to lost customers, or perhaps you have started a new business and have higher costs initially.

If your company invests in some new machinery, as you can claim 100% of the cost of this against your profits, this could create a loss.

To calculate a trading loss, you should make the usual tax adjustments to the profit or loss shown in the financial accounts and then:

-Include any capital allowances (which will increase the loss)

-Include any balancing charges (which will reduce the loss)

-Do not include losses or gains that might be made on the disposal of assets

There are several options available to a Limited Company for utilising the loss depending on the situation.

Carry back of losses

A loss can be carried back to the previous accounting period and used to reduce the profits in that year. 

So, for example, if you make a loss of £20k in the year to 31 December 2023 and had a profit of £50k in the year to 31 December 2022, you can carry back the £20k to that previous year. 

This will result in a Corporation Tax refund which can be claimed by including the loss carry back details on the 2023 CT600 and then resubmitting the 2022 CT600 with the loss brought back into that year.

If you had some Corporation Tax still outstanding, the refund will firstly be used to reduce this and then any excess will be repaid.

A claim should be made within 2 years of the end of the accounting period when you made the loss. 

Carry forward of losses

Alternatively, you can carry forward the loss to use against future profits of the same trade. 

You can also carry back some loss to the previous year to bring the profits down to £nil and then carry forward the excess. This is all done, again, by redoing the previous years CT600.

Terminal loss relief

Terminal loss relief is where the company ceases to trade and makes a loss in the final accounting period. This can be carried back for 3 years starting with the most recent year first.