Hi all.....hope you're all enjoying this hot weather (I'm not...lol)
Just to say that this is slightly outside my level of experience and qualification, but was just posing the question as I had been thinking about it for one of my clients. Obviously I would point her in the direction of her accountant for advice on this.
How does offsetting losses against profits work? I'm assuming it is slightly more complicated than carrying forward a prior year loss against a current year profit to reduce the Corporation tax liability? Also, how does carrying back a loss work? Say she made a loss last year and a profit the year before that, does carrying the loss back to reduce the profit from the prior year result in a Corporation tax refund? She only has the one trade, a limited company, which has been in operation for 9 years, although being a Director she is on the payroll and pays PAYE. (Not sure if that is relevant).
Read lots about this on the web and am going round in circles...lol
1. Basically you can carry forward corporation tax losses indefinitely and offset them against corporation tax profits in later years.
2. If you have a loss in a year you can either carry forward as in 1 above or carry the loss back one year and offset against taxable profits in that year. The benefit in doing this is that it will reduce the corporation tax in the previous year and therefore result in an immediate CT refund. You would need to submit an amended company tax return for the year before when submitting the current year tax return in order to trigger the refund.
The fact that she is a salaried director isnt of any relevance to your query.
