The Corporation Tax (Carry Back of Losses: Temporary Extension) Regulations 2021

EXPLANATORY NOTE

(This note is not part of the Regulations)

Section 18 of, and Schedule 2 to, the Finance Act 2021 (ch. 26, “FA21”) provide for a temporary extension to the carry back of trading losses from one year to three years, for losses up to £2,000,000 per 12-month period for companies and groups of companies. This has effect for companies with accounting periods ending between 1 April 2020 and 31 March 2022. A company may not make a claim that exceeds £200,000 unless the total of all other claims made by the company, and any other members of the group of which the company is part, does not exceed £2,000,000. In order to apply this £2,000,000 cap, FA21 requires groups to specify on a loss carry-back allocation statement how the losses are to be applied. These Regulations provide for the requirements for the submission of loss carry-back allocation statements.

Part 1 provides for citation, commencement and interpretation.

Part 2 provides the requirements for the loss carry-back allocation statements for the 2020 financial year. Regulation 3 provides for the nomination of a member of a 2020 group to submit a loss carry-back allocation statement on behalf of the group. Regulations 4 to 7 provide for the submission of a loss carry-back allocation statement and when amendments may or must be made.

Part 3 provides corresponding requirements to Part 2 for the loss carry-back allocation statements for the 2021 financial year.

Part 4 provides for the amendment of company tax returns in consequence of a loss carry-back allocation statement (including provision altering time limits that would otherwise apply) and the recovery of overpaid relief.

A Tax Information and Impact Note covering this instrument was published on 3 March 2021 alongside the Budget and is available on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.