Trading loss

Carry back

You may carry back a trading loss for offset against profits of any kind in the immediately preceding accounting period of equal length. A claim must be made within two years of the end of the accounting period in which the loss occurs (s 396(9)).

You may carry back a loss in your final year of trading (a terminal loss) for set-off against profits of the three immediately preceding years (s 397). This may give rise to a repayment of tax.

Carry forward

You may carry forward an unused trading loss against trading profits of the next and later accounting periods (s 396).

You may carry forward a Case III loss (for example, in the case of a foreign trade) against Case III income of the next and later accounting periods.

You may carry forward a Case IV loss against Case IV income of the next and later accounting periods.

Ring-fencing of losses (also applies to charges and group relief)

You may relieve a 25%-taxed profit with a 12.5% trading loss, but only on a value basis.

Rental loss

You may carry back a Case V loss against rental profits in an immediately preceding accounting period of equal length.

You may carry forward an unused Case V loss against income of the next and later accounting periods (s 399).

Capital loss

You may carry forward a capital loss against capital gains of future accounting periods. You may not set such a loss against development land gains (s 653(1)).

You may offset a development land loss against a development land gain arising in the current accounting period, and carry forward any unused balance to future accounting periods (s 653(2)).

Group relief

You may surrender an unused trading loss to a company within the same 75% group (s 420).

If you begin to carry on a trade previously carried on by another company, and you own not less than 75% of that company’s trade, you may claim the predecessor’s unrelieved losses (s 400), but “loss-buying”, i.e., acquiring the accumulated losses of a near dormant business, is disallowed (s 401).