Terminal Loss Relief A>Z?

Updated: 04.07.2023

Introduction

The Approach to this and all Articles is consistent with our Standard System and Procedure.

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.

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.

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.

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).

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.

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.

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