Terminal loss and trading loss

Terminal losses can be offset vs trading profits of the business in the year of cessation (usually nil) and the 3 preceding tax years starting with the last year (lifo). As you mentioned, terminal losses are calculated in a special way, you need to learn the rule.

The alternative is to offset the trading loss (including the overlaps profits of the opening years) incurred in the year of cessation vs general income of the current and/or preceding year.
You should watch the OT F6 lectures on this topic, they are really clear. Also try the q 06/13 Spike, if you have it in your revision kit.

The terminal loss relief is an alternative to the normal loss relief vs general income.
HMRC tries to help businesses that are ceasing to trade at a loss by extending the timeframe during wich the loss can be offset.

If however, you decide to use the normal relief (vs general income of current and/or previous period) then there would be no terminal loss relief available.

If you claim the terminal loss relief and the actual trading loss (including overlaps) is higher than the terminal loss then you can still offset the difference using the normal relief, as explained above.
This point is explained brilliantly by the Tax Tutor in this lecture: https://opentuition.com/acca/f6/terminal-loss-relief/