Income Tax Act 2007 section 90

Losses that are "terminal losses"

Section 90 sets out how terminal losses are calculated when a trade ceases, defining the two periods that make up a terminal loss and explaining how profits and losses of accounting periods are allocated to those periods.

• A terminal loss is the sum of two components: any loss from the start of the final tax year to cessation, and any loss from the part of the previous tax year falling within 12 months before cessation.
• Profits or losses for each terminal loss period are derived from the trade's periods of account as calculated for income tax purposes, with apportionment where accounting periods do not align with the terminal loss periods.
• Any overlap profit deduction allowed in the final tax year is included only in the first component of the terminal loss calculation and is disregarded for the second component.
• For partners in a firm, the periods of account of the notional trade are treated as those of the actual trade, and references to profits or losses mean the partner's allocated share.