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Corporation tax terminal loss relief

Corporation tax terminal loss relief

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Limited Company who has the following results:

y/e 31/07/09 Profit £370,000
y/e 31/07/10 Profit £100,000
14 months ending 30/09/11 Loss £460,000

Can anyone provide guidance on which of the following is correct when combining both terminal loss relief and normal trading losses being carried back to preceeding 12 month period (preferably linked to relevant HMRC legislation / guidance):

Option 1

Terminal losses = Final 12 months losses =

2 months re 01/08/11 to 30/09/11 = £460,000 * 2/14 =                 £65,714

10 months re 01/10/10 - 31/07/11 calculated as

           Total re y/e 31/07/11 of:                                  £394,286

           Less element carried back to y/e 31/07/10   ( £100,000)

           Balance to apportion                                       £294,286

           Apportioned as:                                 £294,286 * 10/12 =  £245,238

Total terminal loss relief available                                                £310,952

Therefore option 1 total losses relieved = £410,952

Option 2

Final 12 months losses = y/e 30/09/11 = £460,000 * 12/14 = £394,286

Therefore maximum terminal losses available are as above = £394,286

Normal losses carried back to preceeding year total £100,000 therefore only £360,000 of terminal losses claimed.

Therefore total losses relieved = £460,000

Option 3

Final 12 months losses = y/e 30/09/11 = £460,000 * 12/14 = £394,286

Therefore maximum terminal losses available are as above = £394,286 claimed in full

Normal losses carried back to preceeding year claimed amounting to £65,714

Therefore total losses relieved = £460,000

Many thanks in advance for anyone with answers to this.

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By Exector
18th Jun 2012 09:58

HMRC link

see CTM 04520-04450, which has TLR examples:

 

http://www.hmrc.gov.uk/manuals/ctmanual/ctm04520.htm

 

 

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