Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

397 Relief for terminal loss in a trade


This section provides that a loss incurred in the last 12 months of a discontinued trade, in so far as it cannot be otherwise relieved, may be carried back and set against the trading income of the same trade in the 3 preceding years.


(1) A company may claim to set a trading loss incurred in the last 12 months of a trade carried on by it against its income from the same trade in the 3 preceding years. This only applies where the loss has not or cannot be otherwise relieved. The loss is to be set against income of a later period in priority to an earlier period and is not to displace relief already given or capable of being given for losses carried forward from earlier periods.

(2) Losses and income are to be apportioned as necessary where accounting periods fall partly outside the periods of 12 months and 3 years already mentioned.

(3) The provisions of subsections (5) to (8) of section 396 are applied for the purposes of terminal loss relief. This secures that for terminal loss purposes —

  • a loss is to be computed in the same manner as profits,
  • relief is available against interest and dividends (other than dividends from a resident company) of a financial trading concern,
  • charges on income in excess of profits, which are paid for the purposes of the trade, can, up to the amount of the excess, be treated as creating a loss qualifying for terminal loss relief, and
  • relief is available only to a company which is within the charge to corporation tax at all material times.

Terminal loss relief does not operate to displace relief for charges on income paid for trade purposes.

Example 1

A company which makes up its accounts to December, 31 ceases to trade on 31/12/2002 and in the 12 months accounting period to that date incurs a trading loss of €10,000.

In the 12 months accounting period to 31/12/2002 the company also has investment income chargeable to corporation tax of €2,000. The trading loss to be carried back must be reduced by the amount of €2,000 because terminal loss relief is not deductible to the extent that it can be claimed under another provision, in this instance, section 396(2). The terminal loss which may be carried back for set-off against trading income of the 3 year period ending on 31/12/2001 is therefore €8,000, namely —

Trading loss of final 12 months trading


Less: losses relieved against other income



Example 2

A company ceases to trade on 30/6/2002 and the trading results are —

Accounting period 12 months to 31/12/2001



Accounting period 6 months to 30/6/2002



The loss of the final 12 months in respect of which terminal loss relief could be granted is —

6 months period to 30/6/2002



6 months period to 31/12/2001 (6/12 × €60,000)




The 3 years trading income against which this loss could be set is that of the 3 year period ending 30/6/2002 —

Trading income

6 months period to 30/6/2002


12 months period to 31/12/2001


12 months period to 31/12/2000


6 months period to 31/12/1999


The income of the 6 months period 31/12/1999 would be computed – 6/12 × trading income of 12 months accounting period to 31/12/1999 (€20,000) = 6/12 × 20,000 = €10,000.

Income of 3 years against which loss of final 12 months (i.e. €50,000) could be set off is, therefore, €40,000.

Relevant Date: Finance Act 2021