Loss carry-back claims and Corporation Tax refunds

Short version. If your company made a loss this year but paid Corporation Tax last year, you may be able to carry the loss back and reclaim some of that tax. SimpleCompanyTax does not file the carry-back claim for you. You make that claim separately with HMRC. But you can reflect the money you expect back in your accounts: enter it under Tax adjustments → “Expected Corporation Tax repayment” and it appears as Corporation Tax recoverable on your balance sheet and as a tax credit in your profit & loss. Those accounts are filed with your CT600 to HMRC and to Companies House, so your published figures show the refund you’re owed, even though the claim itself is made elsewhere.

1. What a loss carry-back is

Normally a trading loss is carried forward, kept and set against a future year’s profit (see Using trading losses to reduce your Corporation Tax). A carry-back goes the other way: you take this year’s loss and set it against the profit of the previous 12 months. Because you already paid Corporation Tax on that earlier profit, HMRC refunds the tax that the loss now cancels out. This is trading-loss relief under section 37 of the Corporation Tax Act 2010.

2. A loss on its own isn’t a refund

This trips a lot of people up. Making a loss does not automatically mean HMRC owes you money. Your Corporation Tax for a loss-making year is simply £0. There’s nothing to refund unless there’s tax you already paid that the loss can be set against. You’re only due money back if both of these are true:

• your company was profitable in the previous year and paid Corporation Tax, and
• you carry this year’s loss back against that year (or the company is ceasing to trade, see section 7).

If last year was also a loss or a break-even, there’s no earlier tax to reclaim, so your loss simply carries forward instead, which SimpleCompanyTax handles automatically.

3. What SimpleCompanyTax does and doesn’t do

What we don’t do: we don’t file the carry-back claim on your CT600. The return’s tax figures are unchanged (Corporation Tax stays £0 for a loss), and the loss is recorded as carried forward. Making the actual repayment claim is a separate step you do with HMRC (section 5).

What we do: we let you recognise the expected repayment in your statutory accounts: a “Corporation Tax recoverable” asset on the balance sheet and a matching tax credit in the profit & loss. This is normal FRS 105 / FRS 102 accounting for a tax refund you’re entitled to and expect to receive.

4. Show the expected refund in your accounts

When your period is loss-making, the wizard shows a Corporation Tax repayment section under Tax adjustments. There you:

1. enter your Expected Corporation Tax repayment (the amount you’re reclaiming), and
2. tick the confirmation that you have made, or intend to make, a valid claim for it. The figure is ignored until you confirm this.

Once entered, it flows through to your filed documents like this:

• Profit & loss: the tax line shows a Corporation Tax credit (it adds to your profit for the year rather than reducing it).
• Balance sheet: a Corporation Tax recoverable row appears within current assets. It’s money HMRC owes the company.

These accounts are the ones filed to Companies House and embedded with your CT600 to HMRC, so your published position correctly shows the refund due. Important: entering this figure does not claim the repayment. It only represents it in your accounts. Only enter an amount if you’ve genuinely made or intend to make a valid claim.

5. How to actually claim the refund

You make the carry-back claim directly with HMRC, in one of these ways:

• Amend last year’s Company Tax Return to record the loss carried back against that year’s profit, which is what actually triggers the repayment, or
• Write to HMRC’s Corporation Tax office, quoting your company UTR, the accounting period the loss arose in, the amount of loss to carry back, and the earlier period it’s set against, or
• ask your accountant to make the claim for you.

HMRC repays the tax (usually to the company’s bank account) once the claim is processed. Keep the confirmation so it reconciles against the “Corporation Tax recoverable” figure in your accounts.

6. Deadlines and limits

• Time limit: a carry-back claim must normally be made within two years of the end of the accounting period in which the loss arose.
• How far back: a standard trading loss carries back 12 months against the total profits of the preceding period.
• Capped at tax paid: you can only reclaim up to the Corporation Tax actually paid on that earlier profit. You can’t get back more than you put in.

7. Company ceasing to trade (terminal loss)

If your company is stopping trading, a loss in its final 12 months can be carried back up to three years (terminal loss relief). SimpleCompanyTax doesn’t file that claim either, but you can represent the expected refund in your final accounts the same way (section 4) and make the claim with HMRC. See also Filing a final CT600 when your company has ceased trading.

8. What’s covered (and what isn’t)

Covered in SimpleCompanyTax:

• reporting a trading loss and carrying it forward automatically, and
• showing an expected Corporation Tax repayment in your accounts (balance sheet asset + P&L credit).

Not filed by SimpleCompanyTax (claim these with HMRC or an accountant):

• the loss carry-back claim itself (s.37) and any related CT600 repayment entries,
• terminal loss relief (s.39, three-year carry-back on cessation), and
• R&D tax credits and other loss surrenders.

For most micro-entities a loss simply carries forward. If you were profitable last year and want the cash back now, use the steps above and an accountant can confirm the claim if you’re unsure.

Related: Using trading losses (brought forward) · Paying Corporation Tax after filing