Corporation Tax Act 2010 section 39

Terminal losses: extension of periods for which relief may be given

Section 39 extends the carry-back period for trade loss relief from 12 months to 3 years when a company ceases to trade and has incurred a terminal loss.

• When a company stops trading and has made a terminal loss, the normal 12-month carry-back period for trade loss relief is extended to 3 years.
• A terminal loss includes the whole of any trade loss arising in an accounting period that begins within the final 12 months before cessation, plus a proportionate share of any loss from a period that ends (but does not begin) within that final 12 months.
• The proportionate share is calculated by comparing the part of the accounting period falling within the final 12 months to the length of the whole accounting period.
• The entitlement to claim relief remains under section 37, and a loss that has already been fully relieved under that section cannot be relieved again simply because it also qualifies as a terminal loss.