Taxes Consolidation Act 1997 section 397

Relief for terminal loss in a trade

Section 397 provides terminal loss relief for companies, allowing a trading loss incurred in the final 12 months of a discontinued trade to be carried back and set against the trading income of the same trade in the three preceding years, to the extent the loss cannot otherwise be relieved.

• A terminal loss arises within the 12 months before cessation of trade and may be set against trading income of the same trade in the three preceding years, with later accounting periods relieved in priority to earlier ones.
• Relief is available only for losses that cannot otherwise be relieved, and must not displace relief already given or still available for losses carried forward from earlier accounting periods.
• Where accounting periods fall partly outside the relevant 12-month or three-year windows, losses and income are apportioned on a time basis.
• The computational rules of section 396(5)–(8) apply, and terminal loss relief must not displace relief for charges on income paid wholly and exclusively for trade purposes.