How to Claim Corporation Tax Terminal Loss Relief

To claim corporation tax terminal loss relief, a company that has permanently ceased a trade calculates its losses from the final twelve months of that trade, then carries them back against total profits of the previous three years, latest year first, to recover corporation tax already paid. The claim goes in on the Company Tax Return (CT600) for the cessation period, as an amendment to that return, or by letter to HMRC, and it must reach HMRC within two years of the end of the accounting period in which the trade ceased.¹ The relief sits in Section 39 of the Corporation Tax Act 2010 and extends the ordinary one-year carry-back for trading losses out to three years when a trade genuinely ends.²

Who Qualifies

Two conditions have to be satisfied. The company must have permanently ceased carrying on a trade, and it must have made a loss during the final period of that trade.² A temporary pause or a seasonal shutdown does not count. The trade must have finished for good.

The relief attaches to a specific trade, not to the company as a whole. If a company runs two separate trades and only one shuts down, terminal loss relief applies only to the losses of the trade that ended; the other trade continues under the normal loss rules. Section 39(6) also makes the relief subject to Section 41, which blocks claims where a trade is effectively being transferred rather than truly ending. If the same activities move to a successor or connected party, terminal loss relief is not available.²

Working Out the Terminal Loss

The terminal loss is built from losses arising during the final twelve months of trading, ending on the date the company stops carrying on the trade.² Two components feed the figure:

The full loss from any accounting period that both begins and ends inside the final twelve months.
A proportionate share of any loss from an accounting period that ends inside the final twelve months but started earlier. The proportion is the fraction of that period that falls within the twelve-month window.²

The loss figure is the trading loss for the relevant period, including the effect of capital allowances and any balancing adjustments on plant and machinery. Balancing adjustments matter here because the normal writing-down allowances stop at cessation. If the tax written-down value of a pool exceeds the disposal proceeds, the company gets a balancing allowance for the difference; if proceeds exceed the pool balance, a balancing charge arises and increases profits.³ Balancing allowances on the main rate and special rate pools can only be claimed in the final period of trade, so a large one can create or enlarge the terminal loss. A balancing charge does the reverse. Getting the apportionment and the pool adjustments right is essential, because misstating the terminal loss will delay the claim or trigger an enquiry.

How the Carry-Back Works

Terminal loss relief sets the losses from the final twelve months against total profits of accounting periods within the three years ending immediately before the loss-making period began. A detail that catches people out is that the carry-back is against total profits, not just trading profits, so the loss can absorb investment income, property income, and other profits in those earlier periods.⁴

You cannot choose which year absorbs the loss. The carry-back follows a strict most-recent-first rule: the loss is set against profits of the latest accounting period first, then the next earlier, and so on until the loss is used up or the three-year window ends.⁴ There is no flexibility to direct the loss to whichever year would produce the largest refund.

If any accounting period inside the three-year window is shorter than twelve months, or the company changed its accounting date during that window, the profits of that period are apportioned on a time basis.⁴

Making the Claim

There are three ways to make the claim: inside the CT600 for the period the loss arose, in an amendment to that return while the amendment window is open, or by separate letter to HMRC. The deadline is two years from the end of the accounting period in which the trade ceased.¹ Miss it and the right to carry the loss back is lost permanently. Diarise the date well in advance.

Whichever route you use, the claim must include four things:

The full name of the company or organisation.
The accounting period in which the loss arose.
The calculated terminal loss figure.
How the loss is to be used, meaning which earlier periods it should be carried back against.⁴

Filing via the CT600 means entering zero in box 155 (tax payable) and the full loss amount in box 780. For a claim by letter, include a detailed computation: how the terminal loss was calculated, the apportionment workings where periods straddle the twelve-month window, and the profits of each earlier period being offset. Clean workings speed up the repayment.

Repayment and Interest

Once HMRC verifies the claim, it repays the corporation tax previously paid on the profits now being offset. Straightforward claims with clear workings tend to be processed within a few weeks. HMRC also pays repayment interest for the period the company was out of pocket. As of January 2026, the corporation tax repayment interest rate is 2.75%, set as the Bank of England base rate minus 1% with a floor of 0.5%.⁵ The interest is taxable, but on a refund covering several years it can add a meaningful amount.

Post-Cessation Receipts and Expenses Are Separate

Money that comes in after the trade has ceased, and costs that fall due after the cessation date, are not part of the terminal loss calculation. Post-cessation receipts are amounts that would have been trading income had they arrived while the trade was still running; they are taxable when received, generally as miscellaneous income. Post-cessation expenses are costs that would have been deductible against trading profits had the trade continued, and they are relieved first against post-cessation receipts before any balance can qualify for broader relief. Typical items include collecting outstanding invoices, settling supplier disputes, paying professional fees for winding-up work, and remediation costs on former business premises. Keep records to the same standard as during trading, because overlooked deductible expenses cannot be added into the terminal loss claim after the fact.

1
GOV.UK. Work Out and Claim Relief From Corporation Tax Trading Losses
2
Legislation.gov.uk. Corporation Tax Act 2010 – Section 39
3
GOV.UK. Capital Allowances When You Sell an Asset
4
GOV.UK. Corporation Tax – Terminal, Capital and Property Income Losses
5
GOV.UK. HMRC Interest Rates for Late and Early Payments