COVID-19 Temporary loss carry-back scheme

A temporary loss carry-back scheme has been introduced by IRD to support business owners in the current uncertain economic environment.

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 – we 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.

IRD can refund some or all of the tax already paid for the preceding year before the loss year has finished by enabling tax payers to estimate their loss.

You do not need to rush to re-estimate your 2020 provisional tax. You can re-estimate up until when your return is filed or due. This gives more time to work out any estimated loss for the 2021 income year.

Shareholder employees of companies electing into the loss carry-back scheme also have up until when their return is filed or due to re-estimate their provisional tax.

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.