In earlier chapters, we have seen how to compute taxable trading profits, after
capital allowances, and allocate them to tax years.
Traders sometimes make losses rather than profits. In this chapter we consider
the reliefs available for losses. A loss does not in itself lead to receiving tax
back from HMRC. Relief is obtained by setting a loss against trading profits,
against other income or against capital gains, so that tax need not be paid on
them. There are restrictions on how much loss relief can be claimed in a tax
An important consideration is the choice between different reliefs. The aim is to
use a loss to save as much tax as possible, as quickly as possible.
Finally, we consider how a loss on the disposal of shares in an unquoted
trading company can be relieved against income in a similar fashion.
In the next chapter, we will see how individuals trading in partnership are taxed.
|1||Income and income tax liabilities in situations involving further overseas aspects and in relation to trusts, and the application of exemptions and reliefs|
|(a)||The contents of the Paper F6 study guide for income tax and national insurance, under heading:||2|
|||B3 Income from self employment|
|(d)||Income from self employment||3|
|(ii)||Advise on the relief available for trading losses following the transfer of a business to a company|
|2||Chargeable gains and capital gains tax liabilities in situations involving further overseas aspects and in relation to closely related persons and trusts together with the application of additional exemptions and reliefs|
|(f)||Gains and losses on the disposal of shares and securities:|
|(iv)||Establish the relief for capital losses on shares in unquoted trading companies||3|
There are various ways in which a trader can obtain relief for trading losses. You are likely to have to advise the most beneficial way of obtaining relief. This will involve considering the rate of tax relief, the potential waste of personal allowances, and how soon relief can be obtained. Read the question carefully to establish if the taxpayer has any particular requirements such as to obtain relief as soon as possible.
Trading losses have been covered in Paper F6. The examination team has identified essential underpinning knowledge from the F6 syllabus which is particularly important that you revise as part of your P6 studies. In this chapter, the relevant topics are:
|B3||Income from self-employment|
|(i)||Relief for trading losses|
|i (i)||Understand how trading losses can be carried forward||2|
|i (ii)||Understand how trading losses can be claimed against total income and chargeable gains, and the restriction that can apply||2|
|i (iii)||Explain and compute the relief for trading losses in the early years of a trade||1|
|i (iv)||Explain and compute terminal loss relief||1|
|i (v)||Recognise the factors that will influence the choice of loss relief claim||2|
There are no changes in 2015/16 from 2014/15 in the material you have already studied at F6.
Loss relief on the transfer of a business to a company and share loss relief against general income is new at P6 level.
1 Losses – an overview
Trading losses may be relieved against future profits of the same trade, against general income and against capital gains.
1.1 Trading losses in general
This chapter considers how losses are calculated and how a loss-suffering taxpayer can use a loss to reduce their tax liability. Most of the chapter concerns losses in respect of trades, professions and vocations.
The rules in this chapter apply only to individuals, trading alone or in partnership. Loss reliefs for companies are completely different and are covered later in this Text.
When computing taxable trading profits, profits may turn out to be negative, meaning a loss has been made in the basis period. A loss is computed in exactly the same way as a profit, making the same adjustments to the accounts profit or loss.
If there is a loss in a basis period, the taxable trading profits for the tax year based on that basis period are nil.
1.2 The computation of the loss
The trading loss for a tax year is the trading loss in the basis period for that tax year. However, if basis periods overlap then a loss in the overlap period is a trading loss for the earlier tax year only.
1.3 Example: computing the trading loss
Here is an example of a trader who starts to trade on 1 July 2015 and makes losses in opening years.
Period of account Loss
1.7.15 – 31.12.15 9,000 1.1.16 – 31.12.16 24,000
Tax year Basis period Working Trading loss
the tax year
2015/16 1.7.15 – 5.4.16 £9,000 + (£24,000 3/12) 15,000
2016/17 1.1.16 – 31.12.16 £24,000 – (£24,000 3/12) 18,000
1.4 Example: losses and profits
The same rule against using losses twice applies when losses are netted off against profits in the same basis period. Here is an example, again with a commencement on 1 July 2015 but with a different accounting date.
Period of account (Loss)/profit
1.7.15 – 30.4.16 (10,000)
1.5.16 – 30.4.17 24,000
Tax year Basis period Working (Loss)/Profit
2015/16 1.7.15 – 5.4.16 £(10,000) 9/10 (9,000) 2016/17 1.7.15 – 30.6.16 £(10,000) 1/10 + £24,000 2/12 3,000
1.5 Other losses
Losses incurred in foreign trades are computed and relieved in a similar manner to those of UK trades and are discussed later in this Text.
Losses from a UK property business have been discussed earlier, and losses on an overseas property business are relieved similarly. Losses on furnished holiday lettings can only be relieved using carry forward loss relief against future income from furnished holiday lettings. Losses on UK furnished holiday lettings and EEA furnished holiday lettings must be dealt with separately.
If a loss arises on a transaction which, if profitable, would give rise to taxable miscellaneous income (see earlier in this Text), it can be set against any other similar income in the same year, and any excess carried forward for relief against miscellaneous income in future years.
|2 Carry forward trading loss relief||12/14|
|A trading loss carried forward must be set against the first available profits of the same trade.|
|A trading loss not relieved in any other way must be carried forward to set against the first available profits of the same trade in the calculation of net trading income. Losses may be carried forward for any|
|number of years.
2.1 Example: carrying forward losses
B has the following results.
|31 December 2013||(6,000)|
|31 December 2014||5,000|
|31 December 2015
B’s net trading income, after carry forward loss relief, is:
|Trading profits 0||5,000||11,000|
Less carry forward loss relief (0) (i) (5,000) (ii) )
Profits 0 0
|Trading loss 2013/14||6,000|
|Less: claim in 2014/15||(i) (5,000)|
|claim in 2015/16 (balance of loss)||(ii) (1,000)|
|3 Trading loss relief against general income||12/14, 9/15|
Where a loss relief claim is made, trading losses can be set against general income (and also gains if a further claim is made) in the current tax year and/or general income (and also gains if a further claim is made) in the preceding tax year.
Instead of carrying a trading loss forward against future trading profits, it may be relieved against general income.
3.2 Relieving the loss
Relief is against the income of the tax year in which the loss arose. In addition or instead, relief may be claimed against the income of the preceding year.
If there are losses in two successive years, and relief is claimed against the first year’s income both for the first year’s loss and for the second year’s loss, relief is given for the first year’s loss before the second year’s loss.
A claim for a loss must be made by the 31 January which is 22 months after the end of the tax year of the loss: so by 31 January 2018 for a loss in 2015/16.
The taxpayer cannot choose the amount of loss to relieve: so the loss may have to be set against income part of which would have been covered by the personal allowance. However, the taxpayer can choose whether to claim full relief in the current year and then relief in the preceding year for any remaining loss, or the other way round.
When calculating the income tax liability, the loss is set against non-savings income, then against savings income and finally against dividend income.
Relief is available by carry forward for any loss not relieved against general income.
Janet has a loss in her period of account ending 31 December 2015 of £26,000. Her other income is £20,000 rental income a year, and she wishes to claim loss relief for the year of loss and then for the preceding year. Her trading income in the previous year was £nil. Show her taxable income for each year, and comment on the effectiveness of the loss relief. Assume that tax rates and allowances for 2015/16 have always applied.
The loss-making period ends in 2015/16, so the year of the loss is 2015/16.
Income 20,000 20,000
Less loss relief against general income (6,000) (20,000)
Net income 14,000 0
Less personal allowance (10,600) (10,600) Taxable income 3,400 0
In 2015/16, £10,600 of the loss has been wasted because that amount of income would have been covered by the personal allowance. If Janet claims loss relief against general income, there is nothing she can do about this waste of loss relief or the personal allowance.
3.3 Capital allowances
The trader may adjust the size of the total loss relief claim by not claiming all the capital allowances they are entitled to: a reduced claim will increase the balance carried forward to the next year’s capital allowances computation. This may be a useful tax planning point where the effective rate of relief for capital allowances in future periods will be greater than the rate of tax relief for the loss relief.
3.4 Trading losses relieved against capital gains
Where relief is claimed against general income of a given year, the taxpayer may include a further claim to set the loss against their chargeable gains for the year less any allowable capital losses for the same year or for previous years. This amount of net gains is computed ignoring the annual exempt amount (see later in this Text).
The trading loss is first set against general income of the year of the claim, and only any excess of loss is set against capital gains. The taxpayer cannot specify the amount to be set against capital gains, so the annual exempt amount may be wasted. We include an example here for completeness. You will study chargeable gains later in this Text and we suggest that you come back to this example at that point.
Less loss relief against general income (19,500)
Net income 0
Capital gains 11,200
Less loss relief: lower of £(27,000 – 19,500) = £7,500 (note 1) and
£(11,200 – 5,200) = £6,000 (note 2) (6,000)
Less annual exempt amount (restricted) (5,200)
Note 1 This equals the loss left after the loss relief against general income claim
Note 2 This equals the gains left after losses b/fwd but ignoring the annual exempt amount
A trading loss of £(7,500 – 6,000) = £1,500 is carried forward. Sibyl’s personal allowance and £(11,100 – 5,200) = £5,900 of her capital gains tax annual exempt amount are wasted. Her capital losses brought forward of £5,200 are carried forward to 2016/17. Although we deducted this £5,200 in working out how much trading loss we were allowed to use in the claim, we do not actually use any of the £5,200 unless there are gains remaining in excess of the annual exempt amount.
3.5 Restrictions on trading loss relief against general income 3.5.1 Commercial basis
Loss relief cannot be claimed against general income unless the loss-making business is conducted on a commercial basis.
Relief cannot be claimed against general income unless the loss-making business is conducted on a commercial basis with a view to the realisation of profits throughout the basis period for the tax year.
3.5.2 Relief cap
An individual taxpayer can only deduct the greater of £50,000 and 25% of adjusted total income when making a claim for loss relief against general income.
There is a restriction on certain deductions which may be made by an individual from total income for a tax year. For P6(UK) purposes, the restricted deductions concern trade loss relief against general income (whether claimed for the tax year of the loss or the previous year), early trading losses relief, share loss relief against general income (these latter two reliefs are both dealt with later in this chapter), and deduction of interest for qualifying purposes (see earlier in this Text).
The total deductions in a tax year cannot exceed the greater of:
- £50,000; and
- 25% of the taxpayer’s adjusted total income for the tax year.
Key term For the purposes of the P6 (UK) examination, adjusted total income is total income less the gross amounts of personal pension contributions.
If a claim is made for relief against general income in the previous year, there is no restriction on the amount of loss that can be used against trading income (of the same trade). The restriction only applies to the other income in that year. Any loss which exceeds the maximum deduction can still be carried forward against future profits from the same trade.
The limits apply in each year for which relief is claimed. If a current year and a prior year claim are made, the relief in the current year is restricted to the greater of £50,000 and 25% of the adjusted total income in the current year. The relief in the prior year is restricted to the greater of £50,000 and 25% of the adjusted total income in the prior year.
The restriction only applies to relief against income, not if a claim is extended to capital gains.
Grace has been trading for many years, preparing accounts to 5 April each year. Her recent results have been as follows:
|Year to 5 April 2015||20,000|
|Year to 5 April 2016||(210,000)|
Grace also owns a number of investment properties and her property business income is £130,000 in 2014/15 and £220,000 in 2015/16.
Show Grace’s taxable income for the tax years 2014/15 and 2015/16 assuming that she claims relief for her trading loss against general income in both of those years and that the tax rates and allowances for 2015/16 have always applied.
|Property business income||130,000||220,000|
|Less personal allowance||(10,600)||(0)|
Less loss relief against general income ) (55,000) Net income 165,000 Loss relief for 2015/16 is capped at £(220,000 × 25%) = £55,000 since this is greater than £50,000. The personal allowance is not available as adjusted net income is at least £121,200.
In 2014/15 loss relief claim is not capped against the trading profit of £20,000. Relief against other income is capped at £50,000 since this is greater than £(150,000 × 25%) = £37,500. The total loss relief claim is therefore £(20,000 + 50,000) = £70,000. The balance of the loss is £(210,000 – 55,000 – 70,000) = £85,000 is carried forward against future profits of the same trade.
Note that the restriction on loss relief means that the loss has been relieved at the additional rate in 2015/16 and at the higher rate in 2014/15. The personal allowance has also been restored for 2014/15.
3.6 The choice between loss reliefs
It is important for a trader to choose the right loss relief, so as to save tax at the highest possible rate and so as to obtain relief reasonably quickly.
When a trader has a choice between loss reliefs, they should aim to obtain relief both quickly and at the highest possible tax rate. However, do consider that losses relieved against income which would otherwise be covered by the personal allowance are wasted.
Relief could be claimed against general income for 2013/14 and/or 2014/15, with any unused loss being carried forward. Relief in 2013/14 would be against general income of £(2,500 + 4,500) = £7,000, all of which would be covered by the personal allowance anyway, so this claim should not be made. A loss relief claim against general income should be made for 2014/15 as this saves tax more quickly than a carry forward loss relief claim in 2015/16 would. The final results will be as follows:
2013/14 2014/15 2015/16
£ £ £
Trading income 2,500 0 14,600
Less carry forward loss relief (0) (0) (0)
2,500 0 14,600
Other income 4,500 32,500 16,000
7,000 32,500 30,600
Less loss relief against general income (0) (21,000) (0)
Net income 7,000 11,500 30,600
Less personal allowance (10,600) (10,600) (10,600) Taxable income 0 900 20,000
|Before recommending loss relief against general income consider whether it will result in the waste of the personal allowance and any tax reducers. Such waste is to be avoided if at all possible.|
Exam focus point
Another consideration is that a trading loss cannot be set against the capital gains of a year unless relief is first claimed against general income of the same year. It may be worth making the claim against income and wasting the personal allowance in order to avoid a CGT liability. However, remember that using a loss against capital gains will only result in a maximum 28% tax saving, whereas setting losses against income can give a maximum 45% tax saving.
Finally, it is important to consider how offsetting a loss against income will impact the taxation of any income which remains taxable. For example, setting a loss against non-savings income might mean that savings income becomes taxable at the starting rate, rather than the basic rate, or higher rate income becomes taxable at the basic rate. Remember that the tax on dividend income in the basic rate band will be covered by the 10% tax credit.
|Less personal allowance||(10,600)|
Luke has been in business as a sole trader for many years, preparing accounts to 31 December each year. In the year ended 31 December 2015, Luke made a profit of £22,600. He anticipates that he will make a loss of £(12,000) in the year ending 31 December 2016. In 2015/16, Luke received gross interest of £6,000. He will have no other income in 2016/17, so no claim can be made to set off the loss in that tax year. Before the loss relief claim, Luke’s income tax liability in 2015/16 is as follows:
|Income tax liability||3,600|
|Less carry back loss||(12,000)|
|Less personal allowance||(10,600)|
If loss relief is claimed against general income for 2015/16, Luke’s income tax liability will be:
Savings income £5,000 0% 0
£(6,000 – 5,000) = £1,000 20%
Income tax liability
The tax saved by making the loss relief claim is therefore £(3,600 – 200) = £3,400, which is 28.3% of the loss.
4 Trade transferred to company
If a business is transferred to a company, a loss of the unincorporated business can be set against income received from the company.
Although carry forward loss relief is restricted to future profits of the same business, this is extended to cover income received from a company to which the business is sold.
The amount carried forward is the total unrelieved trading losses of the business. The set-off must be made against the first available income from the company, including dividends, interest and salary.
Set-off the loss against non-savings income or savings income and then against dividend income.
The consideration for the transfer of the business must be wholly or mainly in the form of shares (at least 80%) which must be retained by the vendor throughout any tax year in which the loss is relieved.
5 Early trading losses relief 6/11, 12/12, 9/15
In opening years, a special relief involving the carry back of losses against general income is available. Losses arising in the first four tax years of a trade may be set against general income in the three years preceding the loss making year, taking the earliest year first.
Early trading losses relief is available for trading losses incurred in the first four tax years of a trade.
Relief is obtained by setting the allowable loss against general income in the three years preceding the year of loss, applying the loss to the earliest year first. Thus a loss arising in 2015/16 may be set off against income in 2012/13, 2013/14 and 2014/15 in that order.
A claim for early trading losses relief applies to all three years automatically, provided that the loss is large enough. The taxpayer cannot choose to relieve the loss against just one or two of the years, or choose to relieve only part of the loss. However, the relief cap which was discussed earlier in this chapter, restricting loss relief against other income, also applies here. This means that losses may be restricted by the cap in earlier years (leaving some income left in charge) with the result that the remaining losses will be available for use in later years, again subject to the cap. Also, the taxpayer has some control as they could reduce the size of the loss by not claiming the full capital allowances available to them. This will result in higher capital allowances in future years.
Do not double count a loss. If basis periods overlap, a loss in the overlap period is treated as a loss for the earlier tax year only.
Claims for the relief must be made by the 31 January which is 22 months after the end of the tax year in which the loss is incurred.
The ‘commercial basis’ test is stricter for this loss relief. The trade must be carried on in such a way that profits could reasonably have been expected to be realised in the period of the loss or within a reasonable time thereafter.
Mr A is employed as a dustman until 1 January 2014. On that date he starts up his own business as a scrap metal merchant, making up his accounts to 30 June each year. His earnings as a dustman are:
2013/14 (nine months) 6,000
|His trading results as a scrap metal merchant are:|
|Six months to 30 June 2014||(3,000)|
|Year to 30 June 2015||(1,500)|
|Year to 30 June 2016||(1,200)|
Assuming that loss relief is claimed as early as possible, show the final net income for each of the years 2010/11 to 2016/17 inclusive.
Since reliefs are to be claimed as early as possible, early trading losses relief is applied. The losses available for relief are as follows.
|Years against which relief is available|
|2013/14 (basis period 1.1.14 – 5.4.14)|
|3 months to 5.4.14 £(3,000) 3/6||(1,500)||2010/11 to 2012/13|
|2014/15 (basis period 1.1.14 – 31.12.14)|
| 6 months to 30.6.14
(omit 1.1.14 – 5.4.14: overlap) £(3,000) 3/6
|6 months to 31.12.14 £(1,500) 6/12||(750)|
|(2,250)||2011/12 to 2013/14|
|2015/16 (basis period 1.7.14 – 30.6.15)|
| 12 months to 30.6.15
(omit 1.7.14 – 31.12.14: overlap) £(1,500) 6/12
|(750)||2012/13 to 2014/15|
|2016/17 (basis period 1.7.15 – 30.6.16)|
|12 months to 30.6.16 The net income is as follows.||(1,200)||2013/14 to 2015/16|
|Less 2013/14 loss||(1,500)|
|Less 2014/15 loss||(2,250)|
|Less 2015/16 loss||(750)|
|Less 2016/17 loss||(1,200)|
The taxable trading profits for 2013/14 to 2016/17 are zero. There were losses in the basis periods.
6 Terminal trading loss relief 12/11, 6/13, 6/15
On the cessation of trade, a loss arising in the last 12 months of trading may be set against trading profits of the tax year of cessation and the previous 3 years, taking the last year first.
Loss relief against general income will often be insufficient on its own to deal with a loss incurred in the last months of trading. For this reason there is a special relief, terminal trading loss relief, which allows a loss on cessation to be carried back for relief against taxable trading profits in previous years.
6.1 Computing the terminal loss
A terminal loss is the loss of the last 12 months of trading.
|It is built up as follows.|
(a) The actual trading loss for the tax year of cessation (calculated from 6 April
|to the date of cessation)
(b) The actual trading loss for the period from 12 months before cessation
|until the end of the penultimate tax year||X|
|Total terminal loss||X|
If either (a) or (b) above yields a profit rather than a loss, the profit is treated as zero.
Any unrelieved overlap profits are included within (a) above.
If any loss cannot be included in the terminal loss (eg because it is matched with a profit) it can be relieved instead by the loss relief against general income.
6.2 Relieving the terminal loss
Relief is given in the tax year of cessation and the three preceding years, later years first.
Set out below are the results of a business up to its cessation on 30 September 2015.
Year to 31 December 2012 2,000 Year to 31 December 2013 400
Year to 31 December 2014 300
Nine months to 30 September 2015 (1,950)
Overlap profits on commencement were £450. These were all unrelieved on cessation.
Show the available terminal loss relief, and suggest an alternative claim if the trader had had other nonsavings income of £13,600 in each of 2014/15 and 2015/16. Assume that 2015/16 tax rates and allowances apply to all years.
The terminal loss comes in the last 12 months, the period 1 October 2014 to 30 September 2015. This period is split as follows.
2014/15 Six months to 5 April 2015
|Unrelieved trading losses||£||£|
|6 months to 30.9.15||£(1,950) 6/9||(1,300)|
|3 months to 31.12.14||£300 3/12||75|
|3 months to 5.4.15||£(1,950) 3/9||(650)|
2015/16 Six months to 30 September 2015 The terminal loss is made up as follows.
|Taxable trading profits will be as follows.|
|Final taxable profits|
|2015/16||1.1.15 – 30.9.15||0||0||0|
If the trader had had £13,600 of other income in 2014/15 and 2015/16 we could consider loss relief claims against general income for these two years, using the loss of £(1,950 + 450) = £2,400 for 2015/16.
The final results would be as follows (we could alternatively claim loss relief in 2014/15).
|Less loss relief against general income||0||0||0||(2,400)|
Another option would be to make a loss relief claim against general income for the balance of the loss not relieved as a terminal loss of £(2,400 – 2,325) = £75 in either 2014/15 or 2015/16.
However, once the personal allowance has been deducted there is only taxable income in 2014/15 and 2015/16 so the full claim against general income is more tax efficient than the terminal loss relief claim.
|Terminal loss relief was tested in June 2015 Question 1(b) Jodie. The examiner commented that ‘many candidates were able to calculate the terminal loss reasonably accurately and to calculate the tax saving at the margin without preparing detailed income tax computations.’|
Exam focus point
7 Share loss relief against general income
Capital losses arising on certain unquoted shares can be set against general income of the year of the loss and/or against general income of the preceding year.
Relief is available for capital losses on shares in unquoted trading companies (originally subscribed for) against general income of the taxpayer for the year in which the loss arose and/or the preceding year.
In summary, the relief is only available if the shares satisfy the conditions of the Enterprise Investment Scheme or the Seed Enterprise Investment Scheme (see earlier in this Text). It is not, however, necessary for income tax relief to have been claimed on the shares.
A claim must be made by 31 January 22 months after the end of the year of the loss.
The relief cap, discussed earlier in this chapter, applies to this loss relief.
|||Trading losses may be relieved against future profits of the same trade, against general income and against capital gains.|
|||A trading loss carried forward must be set against the first available profits of the same trade.|
|||Where a loss relief claim is made, trading losses can be set against general income (and also gains if a further claim is made) in the current tax year and/or general income (and also gains if a further claim is made) in the preceding tax year.|
|||Loss relief cannot be claimed against general income unless the loss-making business is conducted on a commercial basis.|
|||An individual taxpayer can only deduct the greater of £50,000 and 25% of adjusted total income when making a claim for loss relief against general income.|
|||It is important for a trader to choose the right loss relief, so as to save tax at the highest possible rate and so as to obtain relief reasonably quickly.|
|||If a business is transferred to a company, a loss of the unincorporated business can be set against income received from the company.|
|||In opening years, a special relief involving the carry back of losses against general income is available. Losses arising in the first four tax years of a trade may be set against general income in the three years preceding the loss making year, taking the earliest year first.|
|||On the cessation of trade, a loss arising in the last 12 months of trading may be set against trading profits of the tax year of cessation and the previous 3 years, taking the last year first.|
|||Capital losses arising on certain unquoted shares can be set against general income of the year of the loss and/or against general income of the preceding year.|
- Against what income can trading losses carried forward be set off?
- When a loss is to be relieved against total income, how are losses linked to particular tax years?
- Against which years’ total income may a loss be relieved against general income for a continuing business which has traded for many years?
- Maggie has been trading as a decorator for many years. In 2014/15 she made a trading profit of £10,600. She has savings income of £6,000 each year. She makes no capital gains.
Maggie makes a loss of £(28,000) in 2015/16 and expects to make either a loss or smaller profits in the foreseeable future. How can Maggie obtain loss relief?
- For which losses is early years trading loss relief available?
- In which years may relief for a terminal loss be given?
Answers to quick quiz
- Against profits from the same trade.
- The loss for a tax year is the loss in the basis period for that tax year. However, if basis periods overlap, a loss in the overlap period is a loss of the earlier tax year only.
- The year in which the loss arose and/or the preceding year.
- Maggie could make a claim to set the loss against general income of £6,000 in 2015/16, but should not do so, as this amount will be covered by the personal allowance. She can claim loss relief against general income of £(10,600 + 6,000) = £16,600 in 2014/15. The remaining £(28,000 – 16,600) = £11,400 will be carried forward and set against the first available trading profits of her decorating trade.
- Losses incurred in the first four tax years of a trade.
- In the year of cessation and then in the three preceding years, later years first.