In the 2021 Budget changes were announced to enhance the current Loss Relief Rules. The enhanced relief is mainly targeted at the more stable businesses that were previously successful and have suffered unforeseen losses as a result of the global pandemic.
Ultimately, it’s for those clients that stand the greatest long-term chance of employing people again and paying tax in the future. Due to the impact of COVID-19, the government wants to give those businesses who have suddenly suffered significant losses, an opportunity to get some additional cashback into their business.
It’s a decent opportunity for your clients that have been hit hard by COVID. It will give them a cash boost of up to two years extra tax back - for years previously paid - to help them get through these challenging times.
NEW TOOLKIT! We’ve produced a new toolkit for our DTX’ers to (1) reach out and make clients aware of the loss relief changes (2) educate clients on the options for their business circumstances and (3) to ensure you maximise this area of tax advice and consultancy.
There’s everything you’ll need to run a client and prospect campaign and deliver the claims.
Cash Back Bonus – up to triple the benefits!
So, here’s the down-low on the changes to Loss Relief Rules for businesses….
For a business that has made a trading loss since April 2020 and/or forecasts to make a loss up until 31st March 2022, those losses can now be carried back over the last three previous accounting periods/tax years, not just the last one.
Be aware, the relief is capped at £2m of losses for each year that the relief is in place (£4m in total), and will only benefit limited companies, sole traders, and partnerships that have made a profit in one or more of the last three years.
Check out this neat graphic for a Birdseye need to know to look at the changes to Loss Relief:
What are the key options?
It’s not a simple ‘one size fits all’ situation. Depending on a business-specific set of circumstances you need to consider the different options to ensure your clients maximise the opportunity for their business.
There are three main options:
· Make a current Year Claim to reduce a tax bill
· Carry Back losses to receive a Tax Refund
· Carry Forward losses to reduce a future tax bill
For businesses with large losses, a combination of all three should be considered.
NOT ANOTHET BUDGET SPEW?! We have purposefully decided against the ‘conventional budget spew’ which does very little for your clients and drives very little revenue. Instead for DTX’ers, we’ve produced beautiful visual resources, along with supporting guidance, template emails, and other marketing resources to share the information with your clients and prospects. Please login and download the NEW: Covid-19 Loss Relief Toolkit
If you have clients that have made a trading loss since April 2020, they need to consider the best route to get a tax relief cash bonus back into their business.
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