Other tax relief deductions 12 - Post-cessation expenses and certain other losses

Post cessation expenses

If you've paid expenses in connection with a business that has been ceased, you may be able to get tax relief on those payments, if made within 7 years of your cessation. The tax relief will be given for the tax year in which the payments were made.

A claim for expenses paid in the year 6 April 2020 to 5 April 2021 must be made by 31 January 2022.

Enter the total amount you are claiming in this field. If, exceptionally, you are claiming relief against capital gains, please provide details in the 'Any other information' field at the end of the 'Fill in your return' section.

Include payments, made in the year year 6 April 2020 to 5 April 2021, that were for:

• making good, or as damages for, defective work done, or defective services or goods supplied
• any legal or professional costs for any claim against you for that defective work, for example
• insurance against such expenses
• recovering debts that were taken into account in calculating your business profits, before you ceased

Additionally debts that have become bad or have been released under a formal voluntary arrangement within 7 years of the business ceasing may also be included.

If, while you were in business, you had reduced your taxable profits by expenses that had not actually been paid and those expenses are still unpaid at 5 April 2021, reduce the amount you are claiming now by the unpaid amount.

If you recover any of the amounts spent, perhaps from an insurance policy or from a third party, you should enter the amounts received in the 'Other UK income' section of your tax return.

Pre-incorporation losses

You may be able to set any remaining losses against your income from the company, if you:

• have carried forward losses from your business to go against future profits
• transfer your business to a company before all those losses have been used
• received, solely or mainly, shares in that company in exchange for the transfer of your business
• are the beneficial owner of the shares and the company has carried on business throughout the year, or from the date of transfer to 5 April

Relief for former employee's liabilities and costs

If the amount of liabilities or costs to be entered relating to your actual or alleged wrongful acts in a former employment, exceed your total income in the year you may be able to claim the excess against capital gains. There are special rules limiting the relief if you did not pay for these costs, for example, yourself.

Employment loss relief

Relief for losses arising from an employment or office is only available in exceptional circumstances as the general rule is that employment expenses cannot exceed the earnings from which they are deductible. A loss may arise where all or part of any capital allowances due cannot be deducted from the earnings from the employment. And, exceptionally, a loss may also arise directly from the conditions of the employment. Enter any employment loss relief you are claiming to set against other income of the same tax year and give details in the 'Any other information' field. If you wish to claim relief now for an employment loss arising in the tax year 6 April 2021 to 5 April 2022, enter the relief and the year you are claiming relief for under 'income tax losses'.