The trading losses in question can be carried back against total profits of earlier accounting periods up to the capped amount for a period of two years.

The change is temporary and only applies to trade losses for tax year 2020 to 2021 and 2021 to 2022. Trade losses in 2022 to 2023 will be subject to the normal one year carry back rule.

As is the case with existing terminal loss relief rules, losses must be carried back in order, with set off against profits of the most recent year before earlier years, for example loss from current year (CY) to be carried back to CY-1 before CY-2 or CY-3 and to CY-2 before CY-3.