Provisional Loss Carry-Back Claim

Covid-19 has caused a shock to businesses and presented companies with a unique set of challenges. Amongst them is how to manage cash flow within an economic environment that has momentarily halted.

Businesses that were previously profitable but are now potentially loss-making can apply for what is known as a ‘provisional loss carry-back claim’ from HMRC.

What is a provisional loss carry-back claim?

A provisional loss carry-back claim is a little known submission by which in exceptional circumstances a business that is set to make a loss can seek relief against profits made in a previous profit-making period and reclaim the corporation tax previously paid to HMRC. COVID-19 qualifies as such an exceptional circumstance.

HMRC has, in recent days, updated its company tax manual further detailing outlines for businesses who wish to make claims for repayments of corporation tax based on anticipated losses.

What qualifies for such a claim?

Any submission to HMRC requesting the early carry back of losses will need sufficient evidence that losses will be included in the company tax return for the loss making period when it is eventually submitted. In order to qualify, your business will need to show evidence of the following for the current period:

  • Significant losses – that would exceed other income
  • Management accounts showing losses
  • Accurate forecasts
  • Board minutes where financial performance was noted
  • Consideration of whether performance could improve over the remainder of the accounting period

Providing an acceptable form of evidence is therefore critical to the timely success of a repayment.

What are the next steps?

We would need to prepare and finalise your accounts to quantify any losses before we could claim on your behalf. It is possible with the aforementioned supporting evidence, to agree a provisional loss carry-back claim with HMRC, potentially enabling you to claim anticipated losses immediately rather than having to wait.

If you require any assistance compiling and submitting an early loss carry back claim to HMRC in order to try and aide cash flow, please contact us and we would be delighted to help you with your claim.