If your company made a loss this year, there's a silver lining: you can use those losses to reduce your corporation tax bill — either in the current year, past years, or future years.
Understanding how loss relief works can save your company thousands of pounds. Here's everything you need to know.
Types of Losses
Not all losses are treated equally for corporation tax purposes:
Trading Losses
Losses from your company's trade or business. These are the most common and have the most flexible relief options.
Non-Trading Losses
Losses from non-trading activities, such as:
- Property losses (rental income)
- Non-trading loan relationship losses (interest on loans not used for trade)
- Capital losses (selling assets at a loss)
Management Expenses
Expenses of managing an investment company that exceed income.
How to Use Trading Losses
You have several options when your company makes a trading loss:
1. Set Against Current Year Profits
You can set trading losses against your company's total profits for the same accounting period. This includes:
- Other trading income
- Investment income
- Property income
- Chargeable gains
CT600 Box: Box 275 (Trading losses — current period loss)
2. Carry Back to Previous Year
You can carry back trading losses to set against the total profits of the previous 12 months.
Key rules:
- The loss is set against profits of the immediately preceding accounting period
- You must first set against current year profits (if you choose to claim)
- The carry-back claim must be made within 2 years of the end of the loss-making period
CT600 Box: Box 285 (Losses carried back)
3. Carry Forward to Future Years
Any unused trading losses can be carried forward indefinitely to set against future profits.
Key rules:
- From 1 April 2017, carried-forward losses can be set against total profits (not just trading profits)
- There's a £5 million deductions allowance — losses up to this amount can offset profits freely
- Above £5 million, only 50% of remaining profits can be offset
CT600 Box: Box 280 (Losses brought forward)
4. Group Relief
If your company is part of a group, trading losses can be surrendered to other group companies to reduce their tax bills.
Key rules:
- Both companies must be in the same group (75% ownership)
- The surrender is for the overlapping period of both companies' accounting periods
- The claiming company reduces its taxable profits
CT600 Box: Box 295 (Group relief claimed)
Practical Examples
Example 1: Simple Carry Forward
Your company made a £30,000 loss in year 1 and a £50,000 profit in year 2.
- Year 1: No tax to pay (£30,000 loss)
- Year 2: Taxable profit = £50,000 - £30,000 = £20,000
- Year 2 tax at 19% = £3,800 (instead of £9,500)
Saving: £5,700
Example 2: Carry Back
Your company made £40,000 profit in year 1 (paid £7,600 tax) and a £25,000 loss in year 2.
- Carry back £25,000 to year 1
- Year 1 revised taxable profit = £40,000 - £25,000 = £15,000
- Year 1 revised tax = £2,850
- HMRC refund: £4,750
Example 3: Large Company with £5m Restriction
A larger company has £10 million in carried-forward losses and makes £20 million profit.
- First £5 million: offset freely → £15 million remaining profit
- Remaining £15 million × 50% = £7.5 million offset
- Total offset: £5m + £7.5m = £12.5 million
- Taxable: £20m - £12.5m = £7.5 million
- Remaining losses to carry forward: £10m - £12.5m... capped at actual losses used
Which CT600 Boxes to Complete
| Scenario | CT600 Boxes |
|---|---|
| Current year loss | Box 275 |
| Losses brought forward from previous years | Box 280 |
| Carry back to previous year | Box 285 |
| Group relief claimed | Box 295 |
| Group relief surrendered | Box 300 |
| Trading losses carried forward | Box 290 |
Important Deadlines
| Claim Type | Deadline |
|---|---|
| Current year relief | With your CT600 return |
| Carry back (1 year) | 2 years from end of loss period |
| Extended carry back (3 years) | Only for certain terminal and pandemic losses |
| Group relief | 2 years from end of claimant's accounting period |
Common Mistakes
1. Not Claiming Losses at All
Many small company directors don't realise they can claim losses. Even if you don't owe tax this year, make sure your CT600 records the loss so it's available for future years.
2. Missing the Carry-Back Deadline
You have 2 years from the end of the loss-making period to claim a carry-back. After that, you can only carry forward.
3. Confusing Trading Losses with Capital Losses
Capital losses (from selling assets) can only be set against capital gains — not trading profits. They follow different rules.
4. Not Reporting Losses on the CT600
If you don't include losses on your CT600, HMRC won't know about them. Always complete the loss boxes even if there's no tax to pay.
Read more about common filing mistakes: 10 Common CT600 Mistakes and How to Avoid Them
Ready to File Your CT600?
Filing a CT600 with losses doesn't have to be complicated. Taxpipe walks you through the process step by step — including loss relief claims. Just answer the questions and we handle the CT600 boxes automatically.
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