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HMRC internal manual

Company Taxation Manual

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Corporation Tax: trading losses - relief against total profits: preceding accounting periods: cessation of trade

CTA10/S39, CTA10/S944 (2)

General guidance about the carry back of losses against total profits of preceding accounting periods is at CTM04510. When a trade ceases:

  • a loss incurred in an accounting period which falls wholly within the 12 months preceding the date of the cessation of the trade, and
  • a proportionate part of a loss incurred in an accounting period which falls partly within that 12 months,

can be carried back to accounting periods ending within a period of three years preceding the accounting period in which the loss is incurred.

The example at CTM04530 shows how this rule works in practice. A loss can be carried back for three years preceding the beginning of the accounting period in which the loss was incurred, provided part of that accounting period falls within the 12 months prior to cessation. So it is possible for part of the loss to be carried back for more than 4 years prior to the date of cessation.

Where there is a company reconstruction without a change of ownership to which CTA10/S938 applies (CTM06000+), CTA10/S944 (2) prevents a carry back for longer than the usual 12 months allowed by CTA10/S37.