The loss-carry back rules following an increase in earlier profits

The Upper Tribunal’s recent analysis in Peter Lowe and Civic Environmental Systems Ltd v HMRC considers the loss carry-back rules when the profits of the earlier year are subsequently increased.

The combined cases of Peter Lowe and Civic Environmental Systems Ltd v HMRC [2022] UKUT 84 (TCC) addressed three very distinct issues, including Mr Lowe’s entitlement to obtain relief for certain expenditure when calculating the capital gains tax payable following the disposal of a property and the amount of a penalty payable by Mr Lowe in relation to an underassessment on two of his tax returns.

However, this article concerns the third issue, being the consequences of a loss carry-back claim when the profits of the earlier year (i.e. those which are being relieved by the later year’s losses) are subsequently increased.

The facts of the case

In its corporation tax returns, Civic Environment Systems Ltd (CES) declared the following results: