Commentary on Sections Overview Overview Section 89: Carry back of losses on a permanent cessation of a trade
305.This section provides for terminal trade loss relief. It is based on section 388(1) of ICTA.
306.A claim for terminal trade loss relief may be made by a person who permanently ceases to carry on a trade if the person makes a loss in the trade in the final tax year or in the previous tax year. But only that part of a loss from the previous tax year that falls within a period starting 12 months before the cessation is available for this purpose.
307.If a claim is made the full amount of the terminal losses, or as much of them as possible, must be used to reduce the trading profits of the final tax year and the three previous tax years.
308.Subsection (3) omits the concept, in section 388(1) of ICTA, of the trading profits having been “charged” to income tax. See Change 12 in Annex 1.
309.Section 388(5) of ICTA, which is concerned with the interaction between terminal loss relief and charges on income, is not rewritten. This is linked to the approach adopted by this Act to the rules in ICTA about charges on income. The Act gives relief for the payments concerned as a deduction in computing net income, and repeals section 387 of ICTA and section 51 of ITTOIA. See Change 81 in Annex 1.