Businesses expecting to make a loss in either the 2020 year or the 2021 year can use that loss to offset profits they made the year before. In other words, they can carry the loss back one year to the preceding income year.
This can be done before the loss-year return is filed. There are two ways to claim a loss carry-back:
- Include the carried back loss in your tax return – IR will automatically refund any overpaid tax.
- Ask for a refund of any provisional tax you have paid for 2020 if you are going to carry back a loss from 2021.
Inland Revenue’s website has been updated with clear guidance on eligibility, how to apply and how loss-carry backs affect tax and other obligation. This includes specific information for shareholder employees and what happens if you overestimate a loss in a future year.Read more