Sideways Loss Relief
This relief is the normal route to take with losses. The losses can be claimed against other income in the year of loss or against general income (trading profits and other income) in the previous tax year.
Note there must be a sideways loss claim in either or both of 2020/21 or 2019/20 for extended loss claims to qualify.
Extended Loss Relief
If there are still unrelieved losses after a sideways claim then further relief can be achieved against profits in the two previous years, always taking the last year first.
Adam was hit badly by Covid. His trading results for the last four years were as follows:
Total Income in each of these years was:
Adam makes no sideways claim for 2020/21 because other income is already covered by personal/dividend allowances.
However, he makes a sideways claim for 2019/20 which looks like this:
Having made a sideways loss claim, Adam can now make an extended loss relief claim for 2018/19:
As there are still losses available, Adam can make yet another claim for 2017/18:
Two points to note:
a) Extended losses can only be set against trading profits in 2018/19 and 2017/18
b) Had there been some unutilized losses in 2017/18 these could then be carried forward to the year 2021/22
Extended loss relief is a temporary relief to cope with Covid problems. The relief only applies to losses arising in the years 2020/21 and 2021/22.
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