Terminal loss relief for trade losses in the final 12 months

Trading losses incurred by a company in the final 12 months leading up to the discontinuance of trade may be carried back and set against the company’s total profits of accounting periods falling within the three years ending immediately before the beginning of the period in which the terminal loss is incurred. So if the final accounting period for the company is from 1 January 2025 to 31 December 2025, the three-year period for this terminal loss relief will be from 1 January 2022 to 31 December 2024.

It is likely that this will involve an apportionment of losses incurred in the penultimate accounting period because cessation accounts are not always exactly 12 months long.

Where the carry-back claim is made against profits of more than one accounting period, losses must be offset against later years first.

A claim can only be made against the profits of the relevant year if the company was carrying on the same trade at some point in the accounting