The carry back of a loss - periods of less than 12 months 8 / 14

There are 2 areas in claiming loss relief that you should be aware of:

  1. If the period before your loss making period is less than 12 months

    Your carry back relief claim is for 12 months

    Therefore you will have to go one further period back for the remaining months. 

    For example:
    2025 - you had a Loss 
    2024 - the period was 8-month long only 
    2023 - the period was 1 year long

    Then you will take the full 8 months from 2024 and 4 from 2023 total income - to make sure that you have gone back a full 12 months.

  2. For example

    Above,  I must relieve the loss against the total income for 8 months of 2024 and ONLY 4 months of 2023.

    You'll see this clearly in Lina Ltd. Illustration below.

Illustration

Lina Ltd. had the following results:

Year ended 30.04.20248 months ended 31.12.2024Year ended 31.12.25
Trading profits/loss£60,000£2,000£(66,000)
Chargeable gains£2,000£10,000£10,000
Total income£62,000£12,000£10,000

What amount of loss relief will the company get if they use the current year and carry back total income claims for loss relief?

Solution

Note the company's previous accounting period is only for 8 months.  

Therefore the carry back 12 month claim will use these 8 months and go further back 4 months to make up an entire 12 month claim.

Year ended 30.04.20248 months ended 31.12.2024Year ended 31.12.2025
Trading profits/loss£60,000£2,000Nil
Chargeable gains£2,000£10,000£10,000
Total income£62,000£12,000£10,000
Total income current year claim(£10,000)
Total income carry back 12 months claim (set off in full in this 8 month period)£(12,000)
Total income Carry back 12 months claim (restrict set off to of 4 months of profits)
4/12*£62,000 = £20,667 (total income for 4 months)
(20,667)
Total taxable profts£41,333£Nil£Nil
Loss memo:
Trading loss of 31/12/2025(£66,000)
Current year claim against total income£10,000
Carry back claim against total income (8 months)£12,000
Carry back claim against total income (4 months)£20,667
Loss to be carried forward£23,333

Notice how the loss is restricted in the second carry back period.

Look out for this in the exam, don’t just allocate the remaining loss in this second period.