(1) An individual may make an election for the purposes of section 55B if—
(a) the individual is married to, or in a civil partnership with, the same person (“the gaining party”) —
(i) for the whole or part of the tax year concerned, and
(ii) when the election is made or, where the election is made after the death of one or each of them, when they were last both living,
(b) the individual is entitled to a personal allowance under section 35 ... for that tax year,
(c) assuming the individual's personal allowance was reduced as set out in section 55B(6), the individual would not for that year be liable to tax at a rate other than the basic rate, the property basic rate, the default basic rate, the savings basic rate, the dividend nil rate, the Scottish basic rate, a Scottish rate below the Scottish basic rate, the Scottish intermediate rate, the Welsh basic rate, the Welsh property basic rate, the dividend ordinary rate , the savings nil rate or the starting rate for savings,
(ca) where on that assumption the individual would for the tax year be liable to tax at the dividend nil rate, the individual on that assumption would for that year neither be liable to tax at the dividend upper rate, nor be liable to tax at the dividend additional rate, if section 13A (dividend nil rate) were omitted, and
(d) where the individual meets the requirements of section 56 (residence) for the tax year by reason of meeting the condition in subsection (3) of that section, the individual meets the condition in subsection (2) of this section.
(2) The condition is that the individual's hypothetical net income for the tax year concerned is less than the amount of the personal allowance to which the individual is entitled for that tax year under section 35 ....
(3) For the purposes of subsection (2), an individual's “hypothetical net income” is the amount that would be that individual's net income calculated at Step 2 of section 23 if that individual's income tax liability were calculated on the basis that the individual—
(a) was UK resident for the tax year concerned (and the year was not a split year),
(b) was not a qualifying new resident for that tax year,
(c) in that tax year, did not fall to be regarded as resident in a country outside the United Kingdom for the purposes of double taxation arrangements having effect at the time, and
(d) for that tax year, had made a claim for any available relief under section 6 of TIOPA 2010 (as required by subsection (6) of that section).
(4) An individual's hypothetical net income for a tax year is, to the extent that it is not sterling, to be calculated by reference to the average exchange rate for the year ending on 31 March in the tax year concerned.
(5) The personal representatives of an individual may make any election for the purposes of section 55B that the individual (if living) might make in relation to—
(a) the tax year in which the individual dies, or
(b) an earlier tax year.
(1) An election under section 55C is to be made not more than 4 years after the end of the tax year to which it relates.
(2) If the conditions in paragraphs (a) to (d) of section 55C(1) continue to be met, an election continues in force in each subsequent tax year unless—
(a) subsection (3) applies,
(b) the election is withdrawn, or
(c) it ceases to have effect under subsection (5).
(3) Where an election is made after the end of the tax year to which it relates or is made after the death of either of the spouses or civil partners, the election has effect for the tax year to which it relates only (and accordingly does not continue in force for subsequent tax years under subsection (2)).
(4) An election may be withdrawn only by a notice given by the individual by whom the election was made ; an election made by an individual's personal representatives may not be withdrawn.
(5) If an individual's spouse or civil partner does not obtain a tax reduction under section 55B in respect of a tax year in which an election is in force the election ceases to have effect for subsequent tax years; but this does not prevent an individual making a further election for the purposes of section 55B(2)(a) (whether or not in relation to the same marriage or civil partnership).
(6) The withdrawal of an election under subsection (4) does not, except in the cases dealt with by subsection (7), have effect until the tax year after the one in which the notice is given.
(7) The withdrawal of an election under subsection (4) has effect for the tax year in which the notice is given if—
(a) in a case where the individual concerned met the condition in section 55C(1)(a) by reason of being married, the marriage has come to an end in that tax year, or
(b) in a case where the individual concerned met the condition in section 55C(1)(a) by reason of being in a civil partnership, the civil partnership has come to an end in that tax year.
(8) For the purposes of subsection (7)(a), a marriage comes to an end if any of the following is made in respect of it—
(a) in England and Wales, a divorce order which has been made final, a nullity of marriage order which has been made final, a judicial separation order or a corresponding decree,
(b) in Scotland, a decree of divorce, a declarator of nullity or a decree of separation or
(c) in Northern Ireland, a decree absolute of divorce, a decree of nullity of marriage or a decree of judicial separation.
(9) For the purposes of subsection (7)(b), a civil partnership comes to an end if any of the following is made in respect of it—
(a) a dissolution order or nullity order, which has been made final,
(b) a separation order, or
(c) in Scotland, a decree of dissolution, a declarator of nullity or a decree of separation.
(10) A notice under subsection (4) must—
(a) be given to an officer of Revenue and Customs, and
(b) must be in the form specified by the Commissioners for Her Majesty's Revenue and Customs.
(11) Paragraph 3(1)(b) of Schedule 1A to TMA 1970 (amendment of claims and elections) does not apply to an election under section 55C.
(12) In subsection (8) “corresponding decree” means any of the following—
a decree absolute of divorce;
a decree absolute of nullity of marriage;
a decree of judicial separation.
55E Limitation on number of tax reductions and elections
(1) An individual is not entitled to more than one tax reduction under section 55B for a tax year (regardless of whether the individual is a party to more than one marriage or civil partnership in the tax year).
(2) An individual is not entitled to have more than one election for the purposes of section 55B which operates for a tax year (regardless of whether the individual is a party to more than one marriage or civil partnership in the tax year).
(1) This section applies in relation to an individual who claims—
(a) an allowance under Chapter 2 (personal allowance and blind person's allowance) for a tax year, or
(b) a tax reduction under Chapter 3 or 3A (tax reductions for married couples and civil partners) for a tax year.
(2) The individual meets the requirements of this section if the individual—
(a) is UK resident for the tax year, or
(b) meets the condition in subsection (3).
(3) An individual meets the condition in this subsection if, at any time in the tax year, the individual—
(za) is a national of the United Kingdom or a national of an EEA state,
(a) is resident in the Isle of Man or the Channel Islands,
(b) has previously resided in the United Kingdom and is resident abroad for the sake of the health of—
(i) the individual, or
(ii) a member of the individual's family who is resident with the individual,
(c) is a person who is or has been employed in the service of the Crown,
(d) is employed in the service of any territory under Her Majesty's protection,
(e) is employed in the service of a missionary society, or
(f) is a person whose late spouse or late civil partner was employed in the service of the Crown.
(1) This section provides for increases in the amounts specified in—
(a) section 35(1) (personal allowance),
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) section 38(1) (blind person's allowance),
(e) section 43 (tax reductions for married couples and civil partners: the minimum amount),
(f) section 45(3)(a) ... (marriages before 5 December 2005),
(g) section 46(3)(a) ... (marriages and civil partnerships on or after 5 December 2005), and
(h) sections 36(2), ... 45(4) and 46(4) (adjusted net income limit).
(2) It applies if the consumer prices index for the September before the start of a tax year is higher than it was for the previous September.
(3) For the tax year—
(a) the allowances specified in sections 35(1) and 38(1),
(b) the amounts specified in sections 45(3)(a) ... and 46(3)(a) ..., and
(c) the minimum amount specified in section 43,
are found as follows.
Step 1
Multiply the allowance, amount or (as the case may be) the minimum amount for the previous tax year by the same percentage as the percentage increase in the consumer prices index.
Step 2
If the result of Step 1 is a multiple of £10, it is the increase for the tax year.
If the result of Step 1 is not a multiple of £10, round it up to the nearest amount which is a multiple of £10.
That amount is the increase for the tax year.
Step 3
Add the increase for the tax year to the allowance, amount or (as the case may be) the minimum amount for the previous tax year.
The result is the allowance, amount or (as the case may be) the minimum amount for the tax year.
(4) For the tax year, the adjusted net income limits specified in sections ... ... 45(4) and 46(4) are found as follows.
Step 1
Increase the adjusted net income limit for the previous tax year by the same percentage as the percentage increase in the consumer prices index.
Step 2
If the result of Step 1 is a multiple of £100, it is the adjusted net income limit for the tax year.
If the result of Step 1 is not a multiple of £100, round it up to the nearest amount which is a multiple of £100.
That amount is the adjusted net income limit for the tax year.
(5) Subsections (1) to (4) do not require a change to be made in the amounts deductible or repayable under PAYE regulations during the period beginning on 6 April and ending on 17 May in the tax year.
(6) Before the start of the tax year the Treasury must make an order replacing the amounts specified in the provisions listed in subsection (1) with the amounts which, as a result of this section, are the allowances, amounts, the minimum amount and the adjusted net income limits for the tax year.
(7) In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) For the purposes of Chapters 2 and 3, an individual's adjusted net income for a tax year is calculated as follows.
Step 1
Take the amount of the individual's net income for the tax year.
Step 2
If in the tax year the individual makes, or is treated under section 426 as making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part 8 (gift aid) deduct the grossed up amount of the gift.
Step 3
If the individual is given relief in accordance with section 192 of FA 2004 (relief at source) in respect of any contribution paid in the tax year under a pension scheme, deduct the gross amount of the contribution.
Step 4
Add back any relief under section 457 or 458 (payments to trade unions or police organisations) that was deducted in calculating the individual's net income for the tax year.
The result is the individual's adjusted net income for the tax year.
(2) The grossed up amount of a gift is the amount of the gift grossed up by reference to the basic rate for the tax year ....
(3) The gross amount of a contribution is the amount of the contribution before deduction of tax under section 192(1) of FA 2004.
(4) This section is subject to section 809ZM(6) and section 809ZMB(3) (which prevent tainted donations and associated donations from being deducted at Step 2 in subsection (1)).
(1) This Part provides for income tax relief for—
(a) losses in a trade, profession or vocation (and certain post-cessation payments and events) (see Chapters 2 and 3),
(b) losses in a UK property business or overseas property business (and, in the case of a UK property business, certain post-cessation payments and events) (see Chapter 4),
(c) losses in an employment or office (see Chapter 5),
(d) losses on a disposal of certain shares (see Chapter 6), and
(e) losses in certain miscellaneous transactions (see Chapter 7).
(2) This Part needs to be read with Chapter 3 of Part 2 (calculation of income tax liability).
(3) For rules about the calculation of losses for the purposes of this Part, see—
(a) section 26 of ITTOIA 2005 (losses of a trade, profession or vocation calculated on same basis as profits),
(b) sections 272 and 272ZA of ITTOIA 2005 (which apply section 26 of that Act, so that losses of a UK property business or overseas property business are calculated on the same basis as profits),
(c) section 11 of ITEPA 2003 (calculation of “net taxable earnings”), and
(d) section 872 of ITTOIA 2005 (losses from miscellaneous transactions calculated on same basis as miscellaneous income).
(1) This Chapter—
(a) provides for trade loss relief against general income (see sections 64 to 70),
(b) provides for early trade losses relief (see sections 72 to 74),
(c) contains provision restricting both those reliefs and capital gains relief (see sections 74ZA to 82),
(d) provides for carry-forward trade loss relief (see sections 83 to 88),
(e) provides for terminal trade loss relief (see sections 89 to 94),
(f) contains restrictions on the above reliefs for trades, professions and vocations carried on wholly outside the United Kingdom (see section 95), and
(g) provides for post-cessation trade relief (see sections 96 to 100).
(2) This Chapter is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving two or more years).
(3) For a rule treating an individual as starting or permanently ceasing to carry on a trade, profession or vocation for income tax purposes (including those of this Part), see—
(a) section 17 of ITTOIA 2005 (effect of becoming or ceasing to be a UK resident),...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) For the purposes of this Chapter sideways relief is—
(a) trade loss relief against general income, or
(b) early trade losses relief.
(5) References in this Chapter to a firm are to be read in the same way as references to a firm in Part 9 of ITTOIA 2005 (which contains special provision about partnerships).
If relief is given under any provision of this Chapter for a loss or part of a loss, relief is not to be given for—
(a) the same loss, or
(b) the same part of the loss,
under any other provision of this Chapter or of the Income Tax Acts.
(1) A person may make a claim for trade loss relief against general income if the person—
(a) carries on a trade in a tax year, and
(b) makes a loss in the trade in the tax year (“the loss-making year”).
(2) The claim is for the loss to be deducted in calculating the person's net income—
(a) for the loss-making year,
(b) for the previous tax year, or
(c) for both tax years.
(See Step 2 of the calculation in section 23.)
(3) If the claim is made in relation to both tax years, the claim must specify the tax year for which a deduction is to be made first.
(4) Otherwise the claim must specify either the loss-making year or the previous tax year.
(5) The claim must be made on or before the first anniversary of the normal self-assessment filing date for the loss-making year.
(6) Nothing in this section prevents a person who makes a claim specifying a particular tax year in respect of a loss from making a further claim specifying the other tax year in respect of the unused part of the loss.
(7) This section applies to professions and vocations as it applies to trades.
(8) This section needs to be read with—
(a) section 65 (how relief works),
(b) sections 66 to 70 (restrictions on the relief),
(ba) sections 74ZA to 74D (general restrictions on relief),
(bb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) sections 75 to 79 (restrictions on the relief and early trade losses relief in relation to capital allowances), and
(d) section 80 (restrictions on those reliefs in relation to ring fence income),
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) This subsection explains how the deductions are to be made.
The amount of the loss to be deducted at any step is limited in accordance with sections 24A and 25(4) and (5).
Step 1
Deduct the loss in calculating the person's net income for the specified tax year.
Step 2
This step applies only if the claim is made in relation to both tax years.
Deduct the part of the loss not deducted at Step 1 in calculating the person's net income for the other tax year.
Other claims
If the loss has not been deducted in full at Steps 1 and 2, the person may use the part not so deducted in giving effect to any other relief under this Chapter (depending on the terms of the relief).
(2) There is a priority rule if a person—
(a) makes a claim for trade loss relief against general income (“the first claim”) in relation to the loss-making year, and
(b) makes a separate claim in respect of a loss made in the following tax year in relation to the same tax year as the first claim.
(3) The rule is that priority is given to making deductions under the first claim.
(4) For this purpose a “separate claim” means—
(a) a claim for trade loss relief against general income, or
(b) a claim for employment loss relief against general income under section 128.
66 Restriction on relief unless trade is commercial
(1) Trade loss relief against general income for a loss made in a trade in a tax year is not available unless the trade is commercial.
(2) The trade is commercial if it is carried on throughout ... the tax year—
(a) on a commercial basis, and
(b) with a view to the realisation of profits of the trade.
(3) If at any time a trade is carried on so as to afford a reasonable expectation of profit, it is treated as carried on at that time with a view to the realisation of profits.
(4) If the trade forms part of a larger undertaking, references to profits of the trade are to be read as references to profits of the undertaking as a whole.
(5) If there is a change in the tax year in the way in which the trade is carried on, the trade is treated as carried on throughout the tax year in the way in which it is carried on by the end of the tax year.
(6) The restriction imposed by this section does not apply to a loss made in the exercise of functions conferred by or under an Act.
(7) This section applies to professions and vocations as it applies to trades.
67 Restriction on relief in case of farming or market gardening
(1) This section applies if a loss is made in a trade of farming or market gardening in a tax year (“the current tax year”).
(2) Trade loss relief against general income is not available for the loss if a loss, calculated without regard to capital allowances, was made in the trade in each of the previous 5 tax years (see section 70).
(3) This section does not prevent relief for the loss from being given if—
(a) the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking,
(b) the farming or market gardening activities meet the reasonable expectation of profit test (see section 68), or
(c) the trade was started, or treated as started, at any time within the 5 tax years before the current tax year (see section 69 below, as well as section 17 of ITTOIA 2005).
(1) This section explains how the farming or market gardening activities (“the activities”) meet the reasonable expectation of profit test for the purposes of section 67.
(2) The test is decided by reference to the expectations of a competent farmer or market gardener (a “competent person”) carrying on the activities.
(3) The test is met if—
(a) a competent person carrying on the activities in the current tax year would reasonably expect future profits (see subsection (4)), but
(b) a competent person carrying on the activities at the beginning of the prior period of loss (see subsection (5)) could not reasonably have expected the activities to become profitable until after the end of the current tax year.
(4) In determining whether a competent person carrying on the activities in the current tax year would reasonably expect future profits regard must be had to—
(a) the nature of the whole of the activities, and
(b) the way in which the whole of the activities were carried on in the current tax year.
(5) “The prior period of loss” means—
(a) the 5 tax years before the current tax year, or
(b) if losses in the trade, calculated without regard to capital allowances, were also made in successive tax years before those 5 tax years (see section 70), the period comprising both the successive tax years and the 5 tax years.
(1) This section applies for the purposes of sections 67 and 68.
(2) If there is a change in the persons carrying on a trade which involves all of the persons carrying it on before the change permanently ceasing to carry it on—
(a) the trade is treated as permanently ceasing to be carried on, and
(b) a new trade is treated as starting to be carried on,
at the date of the change (but see subsections (3) to (6)).
(3) A husband and wife are treated as the same person.
(4) Persons who are civil partners of each other are treated as the same person.
(5) A husband or wife is treated as the same person as—
(a) a company of which either one of them has control, or
(b) a company of which both have control.
(6) A person's civil partner is treated as the same person as—
(a) a company of which either of the civil partners has control, or
(b) a company of which both have control.
(7) “Control” is to be read in accordance with sections 450 and 451 of CTA 2010.
(1) This section applies for the purposes of sections 67(2) and 68(5) in determining whether a loss, calculated without regard to capital allowances, is made in the trade in any tax year before the current tax year.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) The loss is determined by reference to—
(a) the profits or losses of periods of account of the trade (calculated for income tax purposes, but without regard to capital allowances), or
(b) if (as a result of section 69) a person claiming the relief is treated as the same person as a company within the charge to corporation tax, the profits or losses of the company's accounting periods (calculated for corporation tax purposes, but without regard to capital allowances),
or by reference to both.
(4) If—
(a) a period of account does not coincide with a tax year, or
(b) an accounting period does not coincide with a tax year,
any of the steps in section 7A(2) of ITTOIA 2005 may be taken to arrive at the profits or losses made in a tax year.
For this purpose references in section 203(2) of that Act ... to periods of account are read as including accounting periods.
(5) The steps must be taken in accordance with section 7A(3) or (4) of ITTOIA 2005.
(6) A loss in a trade is calculated without regard to capital allowances by ignoring—
(a) the allowances treated as expenses of the trade under CAA 2001, and
(b) the charges treated as receipts of the trade under that Act.
A person who cannot deduct all of a loss under a claim for trade loss relief against general income may be able to treat the unused part as an allowable loss for capital gains tax purposes: see sections 261B and 261C of TCGA 1992.
72 Relief for individuals for losses in first 4 years of trade
(1) An individual may make a claim for early trade losses relief if the individual makes a loss in a trade—
(a) in the tax year in which the trade is first carried on by the individual, or
(b) in any of the next 3 tax years.
(2) The claim is for the loss to be deducted in calculating the individual's net income for the 3 tax years before the one in which the loss is made (see Step 2 of the calculation in section 23).
(3) The claim must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the loss is made.
(4) This section applies to professions and vocations as it applies to trades.
(5) This section needs to be read with—
(a) section 73 (how relief works),
(b) section 74 (restrictions on the relief unless trade is commercial etc),
(ba) sections 74ZA to 74D (general restrictions on relief),
(bb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) sections 75 to 79 (restrictions on the relief and trade loss relief against general income in relation to capital allowances), and
(d) section 80 (restrictions on those reliefs in relation to ring fence income),
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section explains how the deductions are made for the 3 tax years mentioned in section 72(2). The amount of the loss to be deducted at any step is limited in accordance with sections 24A and 25(4) and (5) .
Step 1
Deduct the loss in calculating the individual's net income for the earliest of the 3 tax years.
Step 2
Deduct any part of the loss not deducted at Step 1 in calculating the individual's net income for the next tax year.
Step 3
Deduct any part of the loss not deducted at Step 1 or 2 in calculating the individual's net income for the latest of the 3 tax years.
Other claims
If the loss has not been deducted in full at Steps 1 to 3, the individual may use the part not so deducted in giving effect to any other relief under this Chapter (depending on the terms of the relief).
74 Restrictions on relief unless trade is commercial etc
(1) Early trade losses relief for a loss made by an individual in a trade in a tax year is not available unless the trade is commercial.
(2) The trade is commercial if it is carried on throughout ... the tax year—
(a) on a commercial basis, and
(b) in such a way that profits of the trade could reasonably be expected to be made in the tax year or within a reasonable time afterwards.
(3) If the trade forms part of a larger undertaking, the reference to profits of the trade is to be read as a reference to profits of the undertaking as a whole.
(4) Early trade losses relief for a loss made by an individual is not available if—
(a) the individual first carries on the trade at a time when the individual has a spouse or civil partner and is living with the spouse or civil partner,
(b) the spouse or civil partner previously carried on the trade, and
(c) the loss is made in a tax year falling after the relevant 4 year period.
(5) The relevant 4 year period comprises—
(a) the tax year in which the spouse or civil partner first carried on the trade, and
(b) the next 3 tax years.
(6) This section applies to professions and vocations as it applies to trades.
(1) This section applies if—
(a) during a tax year a person carries on (alone or in partnership) a trade, profession or vocation (“the relevant activity”),
(b) the person makes a loss in the relevant activity in that tax year, and
(c) the loss arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.
(2) No sideways relief or capital gains relief may be given to the person for the loss (but subject to subsection (5)).
(3) In subsection (1) “relevant tax avoidance arrangements” means arrangements—
(a) to which the person is a party, and
(b) the main purpose, or one of the main purposes, of which is the obtaining of a reduction in tax liability by means of sideways relief or capital gains relief.
(4) In subsection (3) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(5) This section has no effect in relation to any loss that derives wholly from qualifying film expenditure (see section 74D).
(6) For the purposes of this section—
(a) capital gains relief is, in relation to a loss, the treatment of a loss as an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and
(b) capital gains relief is given for a loss when it is so treated.
74A Reliefs in any tax year not to exceed cap for tax year
(1) This section applies if—
(a) during a tax year an individual carries on one or more trades, otherwise than as a partner in a firm, in a non-active capacity (see section 74C), and
(b) the individual makes a loss in any of those trades (an “affected loss”) in that tax year.
(2) There is a restriction on the amount of sideways relief and capital gains relief which (after applying the restrictions under the other provisions of this Chapter) may be given to the individual for any affected loss (but see subsections (7) and (8)).
(3) The restriction is that the total amount of the sideways relief and capital gains relief given to the individual for all the affected losses must not exceed the cap for that tax year.
(4) The cap for any tax year is £25,000.
(5) The Treasury may by order amend the sum for the time being specified in subsection (4).
(6) If—
(a) in a tax year an individual makes a loss to which the restriction under section 103C (losses in trade carried on by non-active or limited partner) applies, and
(b) sideways relief or capital gains relief is given to the individual for that loss,
the amount of the cap under this section for the tax year in the case of the individual is reduced by the amount of that loss.
(7) The restriction under this section does not apply to so much of any affected loss as derives from qualifying film expenditure (see section 74D).
(8) The restriction under this section does not affect the giving of sideways relief for a loss made in a trade against the profits of that trade.
(9) In this section “trade” does not include a trade which consists of the underwriting business of a member of Lloyd's (within the meaning of section 184 of FA 1993).
(10) For the purposes of this section—
(a) capital gains relief is, in relation to a loss, the treatment of a loss as an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and
(b) capital gains relief is given for a loss when it is so treated.
74C Meaning of “non-active capacity” for purposes of section 74A etc
(1) For the purposes of section 74A an individual carries on a trade in a non-active capacity during a tax year if the individual—
(a) carries on the trade at a time during the year, and
(b) does not devote a significant amount of time to the trade in the relevant period for the tax year.
(2) For the purposes of this section an individual devotes a significant amount of time to a trade in the relevant period for a tax year if, in the relevant period, the individual spends an average of at least 10 hours a week personally engaged in activities of the trade and those activities are carried on—
(a) on a commercial basis, and
(b) with a view to the realisation of profits as a result of the activities.
(3) For this purpose “the relevant period” means—
(a) where the individual first started to carry on the trade less than six months before the end of the tax year, the period of six months beginning with the date on which the individual first started to carry on the trade;
(b) where the individual permanently ceased to carry on the trade less than six months after the start of the tax year, the period of six months ending with the date on which the individual permanently ceased to carry on the trade;
(c) in any other case, the tax year.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) If—
(a) any relief is given on the assumption that the individual devoted or will devote a significant amount of time to the trade in the relevant period for a tax year, but
(b) the individual in fact failed or fails to do so,
the relief is withdrawn by the making of an assessment to income tax under this section.
74D Meaning of “qualifying film expenditure” for purposes of sections 74ZA and 74A
(1) For the purposes of sections 74ZA and 74A expenditure is qualifying film expenditure if—
(a) it is deducted under a relevant film provision for the purposes of calculating the profits of a trade, or
(b) it is incidental expenditure which (although not deducted under a relevant film provision) is incurred in connection with the production of a film, or the acquisition of the original master version of a film, in relation to which expenditure is so deducted.
(2) Expenditure is incidental if it is on management, administration or obtaining finance.
(3) The extent to which expenditure is within subsection (1)(b) is determined on a just and reasonable basis.
(4) For the purposes of sections 74ZA and 74A the amount of any loss that derives from qualifying film expenditure is determined on a just and reasonable basis.
(5) In this section—
“the acquisition of the original master version of a film” has the same meaning as in Chapter 9 of Part 2 of ITTOIA 2005 (see sections 130 and 132 of that Act),
“film” is to be read in accordance with paragraph 1 of Schedule 1 to the Films Act 1985, and
“a relevant film provision” means any one of sections 137 to 140 of ITTOIA 2005 (relief for certified master versions of films).
(1) Sideways relief is not available to an individual for so much of a loss as derives from a trade leasing allowance unless the individual meets the time commitment test.
(2) A trade leasing allowance is an allowance made under Part 2 of CAA 2001 in respect of—
(a) expenditure incurred on the provision of plant or machinery for leasing in the course of a trade, or
(b) expenditure incurred on the provision for the purposes of a trade of an asset which is not to be leased but which is fee-producing.
(3) An asset is fee-producing if payments in the nature of—
(a) royalties, or
(b) licence fees,
are to arise from rights granted by the individual in connection with the asset.
(4) To meet the time commitment test conditions A and B must be met.
(5) Condition A is that the individual must carry on the trade for a continuous period of at least 6 months beginning or ending in ... the tax year in which the loss was made ....
(6) Condition B is that substantially the whole of the individual's time must be given to carrying on the trade—
(a) for a continuous period of at least 6 months beginning or ending in the tax year (if the individual starts or permanently ceases to carry on the trade in the tax year (or does both)), or
(b) throughout tax year period (in any other case).
76 First-year allowances and annual investment allowances: introduction
Sideways relief is not available to an individual for so much of a loss as derives from an annual investment allowance or a first-year allowance under Part 2 of CAA 2001 if either section 77 or 78 applies.
77 First-year allowances: partnerships with companies
(1) This section applies if—
(a) the first-year allowance is in respect of expenditure incurred at any time on the provision of plant or machinery for leasing in the course of a qualifying activity, and
(b) either the qualifying activity was at that time carried on by the individual in partnership with a company or arrangements have been made with a view to the activity being so carried on.
(2) It does not matter—
(a) if the firm includes other partners, or
(b) when the arrangements were made.
(3) For the purposes of this section—
(a) letting a ship on charter is treated as leasing the ship, and
(b) references to making arrangements include effecting schemes.
78 First-year allowances and annual investment allowances: arrangements to reduce tax liabilities
(1) This section applies if—
(a) the annual investment allowance or first-year allowance is made in connection with a relevant qualifying activity or a relevant asset (see subsections (2) and (3)), and
(b) arrangements within subsection (4) have been made.
(2) A qualifying activity is a relevant one if—
(a) at the time when the expenditure was incurred, the activity was carried on by the individual as a partner in a firm, or
(b) at a later time, it has been carried on by the individual as a partner in a firm or transferred to a person connected with the individual.
(3) An asset is a relevant one if, after the time when the expenditure was incurred, the asset was transferred by the individual—
(a) to a person connected with the individual, or
(b) to a person at a price lower than its market value.
(4) Arrangements are within this subsection if as a result of them—
(a) the sole benefit, or
(b) the main benefit,
that might be expected to arise to the individual from the transaction under which the expenditure was incurred is the obtaining of a reduction in tax liability by means of sideways relief.
(5) It does not matter when the arrangements were made.
(6) References to making arrangements include effecting schemes.
(1) If relief is given in a case to which section 75 or 76 applies, the relief is withdrawn by the making of an assessment to income tax under this section.
(2) Expressions which are used—
(a) in any of sections 75 to 78, and
(b) in Part 2 of CAA 2001,
have the same meaning in those sections as in that Part.
(1) This section applies if—
(a) a person has income arising from oil extraction activities or oil rights (“ring fence income”), and
(b) the person makes a loss in any trade.
(2) Sideways relief for the loss is not to be given against the person's ring fence income except so far as the loss arises from oil extraction activities or oil rights.
(3) “Oil extraction activities” and “oil rights” have the meaning given by sections 225A and 225B of ITTOIA 2005.
In the case of a trade carried on by an individual which consists of or includes the exploitation of films—
(a) see section 115 for a restriction on sideways relief if the trade was carried on by the individual as a partner in a firm, and
(b) see section 796 for a charge to income tax if the individual made a loss in the trade (whether carried on alone or as a partner in a firm) for which sideways relief is claimed.
(1) A person may make a claim for carry-forward trade loss relief if—
(a) the person has made a loss in a trade in a tax year, and
(b) relief for the loss has not been fully given under this Chapter or any other provision of the Income Tax Acts or under section 261B of TCGA 1992 (use of trading loss as a CGT loss).
(2) The claim is for the part of the loss for which relief has not been given under any such provision (“the unrelieved loss”) to be deducted in calculating the person's net income for subsequent tax years (see Step 2 of the calculation in section 23).
(3) But a deduction for that purpose is to be made only from profits of the trade.
(4) In calculating a person's net income for a tax year, deductions under this section from the profits of a trade are to be made before deductions of any other reliefs from those profits.
(5) This section applies to professions and vocations as it applies to trades (and section 84 is to be read accordingly).
(6) This section needs to be read with—
(a) section 84 (how relief works),
(b) section 85 (use of trade-related interest and dividends if trade profits insufficient),
(c) section 86 (trade transferred to a company),
(d) section 87 (ring fence trades),
(e) section 88 (carry forward of certain interest as loss), and
(f) section 17(3) of ITTOIA 2005 (effect of becoming or ceasing to be UK resident).
This section explains how the deductions are to be made. The amount of the unrelieved loss to be deducted at any step is limited in accordance with section 25(4) and (5).
Step 1
Deduct the unrelieved loss from the profits of the trade of the next tax year.
Step 2
Deduct from the profits of the trade of the following tax year the amount of the unrelieved loss not previously deducted.
Step 3
Continue to apply Step 2 in relation to the profits of the trade of subsequent tax years until all the unrelieved loss is deducted.
85 Use of trade-related interest and dividends if trade profits insufficient
(1) This section applies if carry-forward trade loss relief cannot be fully given in relation to the profits of a trade of a tax year because (apart from this section) there are no profits, or insufficient profits, of the trade of the tax year.
(2) For the purposes of the relief any interest or dividends for the tax year that relate to the trade are treated as profits of the trade of the tax year.
(3) Interest or dividends for the tax year relate to the trade if they—
(a) arise in the tax year, and
(b) would be brought into account in calculating the profits of the trade but for the fact that they have been subjected to tax under other provisions of the Income Tax Acts.