Company terminal loss relief claim

If your company incurs a loss in its final twelve months of trading, you could make a claim for a special form of relief.

Terminal losses

A company which suffers a loss in its final twelve months of trading can carry back certain losses for 36 months against profits of the same trade rather than the normal twelve months. These are known as terminal losses.

Amount of loss

The terminal loss is calculated as:
 

• the full amount of any trading loss arising in the final period of trade, provided it commenced less than twelve months before the cessation; and
• a time-apportioned amount of any trading loss arising in an accounting period commencing earlier than twelve months before the cessation but ending later than twelve months before the cessation.

If either of the amounts above is a profit, it is excluded from the calculation of the terminal loss.

Exclusions

The terminal loss rules do not apply if:

• when the trade ceases, some other person, who is not within the charge to corporation tax, begins to undertake any of the activities previously carried on; or
• the cessation of trade is part of a scheme to obtain terminal loss relief.

Claiming

The following information should be provided to HMRC in making a claim:

• name of the company
• period when the loss is made
• amount of the loss; and
• how the loss is to be used.

The time limit for terminal loss relief is two years from the end of the accounting period when the loss was made. HMRC has the power to extend this time limit in exceptional circumstances.