The Covid-19 outbreak has had a huge impact on the economy, and in many cases has caused business owners to fall into a loss position.
As a result, HMRC have now acknowledged that, in exceptional circumstances, claims for repayments of corporation tax for prior periods based on anticipated losses before the current accounting period has concluded will be considered.
Therefore if a company is expecting significant losses to arise in 2020 that will be available to carry back to 2019, then a loss carry back claim can be made to reclaim some or all of the 2019 tax paid before the end of the 2020 accounting period.
HMRC will consider repayment claims for both ‘large’ companies who make tax payments under the quarterly instalments regime, as well as other smaller companies. Companies will be required to provide evidence to substantiate claims and support the quantum of any losses expected to accumulate and will need to demonstrate that the losses are so substantial that they will comfortably shelter any income of the current period and the taxable profits of the prior period relevant to the claim.
The types of information which would be useful to provide as part of any claim include revised profit and loss forecasts, management accounts and draft tax computations.
The intention is to provide cash-flow support to previously profitable companies who have become loss making during the period they have been impacted by Covid-19.
For help and advice on accelerated loss claims, please get in touch with your usual Magma contact, or email firstname.lastname@example.org