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It was announced in the July Stimulus that business and the self-employed can carry back 2020 losses against 2019 profits. This is a particularly significant measure as it could lead to a tax refund and assist with any cashflow issues. 

Self-Employed Individuals 

A new temporary loss relief scheme has been introduced for self-employed sole traders. 
When self-employed individuals are completing their 2019 Tax Return they can carry back a maximum of €25,000 of 2020 losses (and certain capital allowances) to reduce their 2019 taxable profits. 
Where 2020 accounts are not yet finalised individuals can carry back estimated losses in order to get some relief against 2019 profits, subject to certain conditions being met.
This will allow the self employed to reduce their 2019 tax liability and may well result in a refund being triggered if, for example, you have overpaid 2019 preliminary tax or already filed and paid your 2019 tax return in full.

Corporation Tax Refunds 

A further temporary measure which accelerates the ability of companies to claim relief for projected losses in 2020 against 2019 profits has also been introduced. Under normal Corporation Tax rules companies could carry back losses against profits of the previous accounting period but would have to wait up to 9 months after the accounting year end to avail of this relief.
Under these new proposals, however, companies can project the expected losses for the current accounting period and make an early claim to have those losses offset against any profits in their previous accounting period thereby potentially triggering some much needed tax refunds for the company.
In order to qualify for this new relief:
  • the company must be tax compliant
  • must have incurred or expect to incur a trading loss in an accounting period which includes some or all of the period from 1 March 2020 to 31 December 2020
  • companies will be allowed to lodge a claim to carry-back the losses once at least four months of the current accounting period have elapsed and up to five months after the end of the accounting period, before final accounts have been prepared and filed.
The maximum amount of the estimated loss which qualifies for early carry-back is 50% of the total projected loss for the accounting period. Once the accounts for the current period have been finalised then the balance of any losses not utilised under the accelerated claim can be claimed under the normal loss relief rules for companies.
Business should work with their accountant to ensure they fully benefit from this new process.
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Published 06/08/2020

Date published 6 Aug 2020 | Last updated 6 Aug 2020

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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