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 your loss carry-back.
Include the carried-back loss in your tax return – Inalnd Revenue 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.
If you choose to use this scheme, you must advise Inland Revenue through your myIR account under the 'I want to' section of your income tax account. Or you can advise us and we can apply for it on your behalf.
After it has been processed by Inland Revenue, they can refund some or all of the tax already paid for the preceding year before the loss year has finished by enabling customers to estimate their loss.
The following situations cannot be reversed to take advantage of a loss carry-back:
company profits that have been paid out as a dividend or shareholder-employee salary in the preceding year, and
a subvention payment made in a preceding year.
If you do not elect to carry your loss back, it will still be available to carry forward as normal.
If you elect to carry back only part of the loss now, you can carry back the remainder anytime later in the year up until your return is due. Any balance remaining can be carried forward.
Source: Inalnd Revenue, you can find more details on their website.