Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
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You can carry a loss back against a prior year's profits or carry it forward, whichever is more convenient. Here is the Gov UK guidance:
'Instead of carrying a loss forward, you can claim for the loss to be offset against profits for the preceding 12-month period (not accounting period). But you can only do this if your company or organisation was carrying on the same trade at some point in the accounting period or periods that fall in the preceding 12-month period.
For example, if your company or organisation has a loss of £8,000 in the accounting period 1 January 2010 to 31 December 2010 and profits of £20,000 in the preceding 12 months, you can carry back the £8,000 loss to be set off against the profits for the previous accounting year, reducing them from £20,000 to £12,000.'
You do not need to account for earnings outside the 12 month period, but I do accept in your circumstances that this might be adviseable then your company can go dormant without complications.
I do hope that you have found my response of assistance.
1. That is essentially correct.
2. Dividends do not count against profits for Corporation Tax (CT) in any event.
3. Many companies operate on a cash basis, but a principle of consistency must be adopted and you should not chop and change between the two. Preferably you should use an invoice basis as this is a more accurate assessment of any profit or loss made and is certainly HMRC's preferred method, indeed that Department may insist upon it.
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