Terminal Loss Relief A>Z?


What is it?

  • It is the loss which a company makes during their final year of trading.
  • Generally this applies to insolvency practitioners.
  • However, everyone needs to be aware of it
    • Especially in these times when the compnay is facing liquidation.
    • People are having problems paying Insolvency Practitioners and Liquidation costs.
    • This process can not only pay for their costs.
    • Also pay money towards the creditors.

Insolvency Practitioners (IPs)

  • It is the legal and professional obligations of all IPs to ensure that all monies are recovered.
  • For the benefit of the creditors and shareholders.
  • This includes: recoveriues from:
  • Tax rebates arising as a result of Terminal Loss Relief claim.
  • This process can be extremely technical, daunting and time consumable.
  • It is also time sensitive as there are time limits for making claims.

What is Terminal Loss Relief?

  • A business making profits will usually be required to pay corporation tax.
  • However, when the business makes corporation tax losses, there may be a claim for tax relief.
  • A terminal loss is defined as a loss that has arisen in the 12 months prior to the date of cessation (ceases to trade).
  • In the main this loss incurs at the point of “death” i.e. Cessation due to insolvency.

How does it work?

  • Terminal losses can be carried back 3 years from the date of cessation.
  • In the year of loss, the losses can be utilised against profits of the same trade assessable in the final tax year (CTA 2010,s39).
  • In earlier years, unrelieved terminal losses can be utilised against profits of the same trade assessable in the three preceding tax years on a LIFO basis. (CTA 2010,s39).

Time limits?

  • A valid claim must be made with 2 years from the date of cessation although,
  • HM Revenue & Customs (HMRC) have the powers to extend the time limit in special circumstances.

How can Avar help you?

  • This can often be a time consuming area to tackle and requires specialist knowledge.
  • This is where Avar can help and the process is simple.
  • At the time of appointment, you merely need to appoint Avar as tax agents to determine the tax status (all areas of Tax).
  • All you will need to do is sign the 64-8 form authorizing your agent.
  • We will take over dealing with all formalities from that point.
  • Agree the Terminal Loss Relief.
  • Deal with all matters relating to other taxes, as HMRC have the right of “setoff”.
  • Once the refund is received (where due) we will transfer this over to you after deducting the agreed percentage, for preparing the final accounts , agreeing with HM Inspector of Taxes and obtain the tax refund showing those tax losses.
  • We operate on a “No Refund, No Fee” basis.
  • We will request, from time to time, any information required to complete all calculations and to complete the claim. and prepare the accounts.
  • This process is made quick and easy by our file sharing service which we will setup for you remotely.
  • We have a proven record in dealing with and obtaining terminal loss relief claims for IPs.
  • If you are an insolvency practitioner and would like to discuss this further, please get in touch with us and talk to one of our tax specialists.

Useful Links

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Terminal Loss Relief Eligibility