Nobody plans to lose money, but when your business hits a rough patch, the tax system does offer some ways to soften the blow.
The key is knowing how to use those rules properly, rules often made more confusing by HM Revenue & Customs (HMRC).
Not every dip in revenue qualifies for tax relief.
Trading losses are different from, say, selling off old equipment at a loss (that’s handled separately).
Things like capital allowances can actually increase the loss you claim, while balancing charges reduce it.
So before you get excited about tax breaks, make sure you are looking at the right numbers.
If your business is still making some profit in other areas, you can use this year’s losses to reduce your tax bill right now.
No waiting, no complicated paperwork, just a straightforward way to free up cash when you need it most.
Just make sure everything is properly documented in your Company Tax Return, or HMRC might start asking awkward questions.
If you have made a loss this year, you might be able to apply it to last year’s profits and get a refund. The conditions for this are that:
A sudden tax rebate can be a lifeline, so it is worth checking if this applies to you.
If you do not need immediate relief, you can carry losses forward to reduce future tax bills.
Since 2017, you can only offset £5 million plus 50 per cent of any remaining profits.
That means if you are sitting on big losses, you will need a smart plan to make the most of them over time.
The biggest slip-ups include missing deadlines, messy records, or not realising what you’re entitled to.
A little attention to detail (or the right advice) can make the difference between a clever tax move and a missed opportunity.
If all this sounds like a headache, that’s because it can be, but getting it right means turning a bad year into something a little less painful.
If you are not sure where to start, it might be time to ask someone who knows the system inside out.
Want to make sure you are not leaving money on the table? Speak to our experts today.
