Taxes Consolidation Act 1997 section 396

Relief for trading losses other than terminal losses

Section 396 provides relief for trading losses incurred by a company, other than terminal losses, by allowing such losses to be carried forward against future trading income of the same trade, set off against profits of the same accounting period, or carried back against profits of the immediately preceding accounting period of equal length.

• A trading loss may be carried forward indefinitely and set off against trading income from the same trade in succeeding accounting periods, with relief applied to earlier periods before later ones.
• Alternatively, a company may claim to set a loss against profits of any description — trading income, other income, and chargeable gains — for the same accounting period, and may carry back any unrelieved balance against profits of the immediately preceding period of equal length.
• Losses from a trade carried on wholly abroad (Case III) may only be carried forward against future profits of the same foreign trade; they cannot be set against other income or carried back.
• A claim under the carry-back and same-period relief provisions must be made within two years of the end of the accounting period in which the loss is incurred.

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