BIM75485 - Trading losses: terminal loss relief: annual payments
For the purpose of determining the amounts against which a
terminal loss can be set, the profits for the year of
discontinuance and each of the three preceding years are regarded
as reduced by the amount (before deduction of tax) of any annual
payments made in the year out of profits or gains brought into
charge.
Where such a restriction is made on account of an annual
payment which, if it had been assessed under ICTA88/S350 would not
have been treated as a loss available for carry- forward under
ICTA88/S387 (for example, a payment not made wholly and exclusively
for the purposes of the trade etc), the corresponding part of the
terminal loss is to be treated as if it had been allowed and it
will accordingly not be available for further carry-back.
This guidance refers only to annual payments from which tax
was deducted. Cases in which relief has been given for deductions
for allowable interest or for interest, patent royalties etc. paid
in full under a double taxation agreement or where there has been
failure to deduct tax should be referred to CT&VAT (Technical).
Interest, patent royalties and income (other than dividends)
normally paid under deduction of tax to a non-resident person are
paid in full, or under deduction of tax at a reduced rate, where
Regulation 2 of SI1970/488 operates, that is, where relief from UK
tax is due under a double taxation agreement and a notice to pay in
full, or under deduction of tax at a specified rate, has been given
to the payer by The Centre for non-residents, Fitzroy House, PO Box
46, Nottingham NG2 1BD (see DT1822).
Where in such cases the income (other than interest) is paid
in full and, but for the operation of Regulation 2:
- an assessment under ICTA88/S350 would have been made,
and
- the amount of the ICTA88/S350 assessment would have been available to be carried forward under ICTA88/S387, as though it were a loss,
carry-forward should be admitted as though a ICTA88/S350
assessment has been made (Regulation 7, SI1970/488).
Where the income (other than interest) is paid under
deduction of tax at a reduced rate and a Section 350 assessment is
necessary, carry-forward as a loss under Section 387 should be
admitted as though tax had been deducted at the full rate.
