The nil tax bill is the number you see. The losses you give up are the number you do not.
The relief does not remove your tax automatically. You elect it, and electing replaces your normal treatment for the whole period, switching off what that treatment carries, chiefly the right to use certain losses and reliefs. So the choice is never tax or no tax. It is which treatment leaves you better off across this year and next, and the cheaper-looking side does not always win.
One election. Two treatments. You only get one.
The same eligible year can go two ways. Electing erases this year's tax. Holding keeps the machinery that pays off later. Which is right turns on your numbers, not on which sounds better.
Tax this year goes to zero
The clean win when you are profitably under the line and not carrying losses you would rather use.
- No corporate tax due for the period
- Simpler return for a simple year
- Loss carry-forward switched off this year
Keep the losses for later
The quieter win when you are loss-making or near the ceiling, with profit ahead taxed at 9%.
- Losses carried against future taxed profit
- No reliance on a position that sunsets
- A small tax bill payable this year
The election is for the period, not forever. Two traps sit either side: skip it assuming it is automatic and you pay tax you could have avoided; build the company around nil tax and you meet an unmodelled 9% position the moment the relief ends.
Four facts decide which path wins.
Not a do-it-yourself decision tree. These are the moving parts. How they land for your year settles whether electing is the better move or the costlier one.
Eligibility, not a quote: these set whether the relief fits your year, not a price. We model the year both ways, with and without the election, and tell you in writing which treatment leaves you better off before you commit.
We treat the relief as a calculation to run, not a default to apply. For most eligible businesses it helps. For some it quietly costs.
On every eligible year, we work through four things:
- Check whether you qualify
- Model the year with and without the election
- Weigh whether keeping your losses serves you better
- Plan for the sunset so you are not exposed when it ends
We say plainly when electing is the obvious move, and just as plainly when holding the normal treatment leaves you ahead. Our corporate tax and VAT page sets out how we handle the election and filing, and the tax picture overview puts it alongside the rest of the regime.