Under current rules businesses already have a number of mechanisms to relieve trading losses against other income including past trading profits.
Unincorporated businesses can offset unlimited trading losses against income in the preceding year and in the early years of business trading losses may be carried back for three years.
The main relief for companies is a carry back of unlimited trading losses against profits made in the previous year.
A proposed revision will apply for two years and will extend the period that current trading losses from businesses can be carried back against previous profits to a period of three years, with losses being carried back against later years first.
The amount of losses that can be carried back to the preceding year remains unlimited. After carry back to the preceding year, a maximum of £50,000 of the balance of unused losses is then available for carry back to the earlier two years.
This change will have effect for company accounting periods ending in the period 24 November 2008 to 23 November 2010. For unincorporated businesses, the measure will have effect in relation to trading losses for tax years 2008/09 and 2009/10.
Source: HMRC budget note 13
