Finance Act 1954

20 Capital allowances (right to set against general income)

(1) Subject to the provisions of this section, any claim made under section three hundred and forty-one of the Income Tax Act, 1952, for relief in respect of a loss sustained by the claimant in any trade may require the amount of the loss to be determined as if an amount equal to the capital allowances falling to be made in charging the profits or gains of the trade for the relevant year of assessment, in so far as effect cannot be so given to those allowances because of an insufficiency of profits or gains, were to be deducted in computing the profits or gains or losses of the trade in that year, and a claim may be so made notwithstanding that apart from those allowances the claimant has not sustained a loss in the trade in that year:

Provided that in the case of a claim made by virtue of subsection (3) of section fifteen of the Finance Act, 1953 (which enables a loss to be carried forward for one year for the purposes of the said section three hundred and forty-one), the deduction shall be of an amount equal to the said capital allowances in so far as, by reason of an insufficiency of profits or gains, effect cannot be given to them in charging the profits or gains of the trade for the relevant year of assessment or for the following year.

(2) Where on any claim made by virtue of this section relief is not given under the said section three hundred and forty-one for the full amount of the loss determined as aforesaid, the relief shall be referred as far as may be to the loss sustained by the claimant in the trade rather than to the capital allowances in respect of the trade.

(3) For the purposes of this section, the capital allowances falling to be made in charging the profits or gains of the trade for the relevant year of assessment shall be treated as not including any part of the allowances for an earlier year, notwithstanding that it is carried forward to the relevant year under subsection (2) of section three hundred and twenty-three of the Income Tax Act, 1952; but effect shall be deemed to be given in charging the profits or gains of the trade to allowances carried forward from an earlier year before it is given to allowances arising in a later year.

(4) Subject to the next following subsection, where for any year of assessment relief is given under the said section three hundred and forty-one by reference to any capital allowances, then for all purposes of the Income Tax Acts effect shall be deemed to have been given to those allowances up to the amount in respect of which relief is given, as if a deduction in respect thereof had been allowed in charging the profits or gains of the trade for that year, and any relief previously given for a subsequent year on the basis that effect had not been given to the allowances as aforesaid shall be adjusted, where necessary, by an additional assessment.

(5) Where in any year of assessment a trade is permanently discontinued, or is treated for the purposes of section nineteen of the Finance Act, 1953, as permanently discontinued, and immediately before the discontinuance the trade was being carried on in partnership, then, notwithstanding the last foregoing subsection, for the purposes of any claim for relief made by virtue of paragraph (c) of subsection (2) of the said section nineteen or by virtue of section eighteen of this Act, and relating to that discontinuance, effect shall not be deemed to have been given either—

(a) to any part of the capital allowances falling to be made in charging the profits or gains of the trade for that year by reason of relief given under the said section three hundred and forty-one by reference to those allowances; or

(b) to any part of the capital allowances falling to be made in charging the profits or gains of the trade for the preceding year by reason of relief so given by reference to them, in so far as that relief must be referred to the part of the allowances apportionable to the part of the year within twelve months of the discontinuance on an apportionment made by reference to the comparative lengths of the two parts of the year;

but, where the same partner claims relief both under the said section three hundred and forty-one and under one or other of the said sections nineteen and eighteen in respect of the same allowances, the total amount for which relief is to be given to him by reference thereto shall not exceed the greater of the amounts for which, apart from any deficiency of income, relief might have been given under either section separately, and the total amount for which relief is to be given to all the partners under those sections in respect of any allowances shall not in any event exceed the amount of the allowances to which effect has not been given apart from those sections.

(6) Where a person claiming relief under the said section three hundred and forty-one has, since the end of the year for which the claim is made, carried on the trade in question in partnership, effect shall not be given to this section in relation to that claim, except with the written consent of, or of the personal representatives of, every other person who has been engaged in carrying on the trade between the end of that year and the making of the claim:

Provided that where the claim is for a loss sustained before an event treated as the permanent discontinuance of the trade, this subsection shall not require the consent of any person as having been so engaged since that discontinuance or as the personal representative of such a person.

(7) In the foregoing subsections, " capital allowances " means allowances under Parts X and XI of the Income Tax Act, 1952, and " relevant year of assessment" means, in relation to any claim under the said section three hundred and forty-one, the year of assessment in which a loss is claimed to have been sustained.

(8) An election under the proviso to subsection (1) of section three hundred and twenty-four of the Income Tax Act, 1952 (which enables an allowance under Part X of that Act of a kind given by way of discharge or repayment of tax and available primarily against a specified class of income to be set off against other income of the year in which the allowance arises), may be made for the year 1954-55 or any subsequent year of assessment with respect to an allowance for the last preceding year, so far as not previously allowed, as if the allowance Were or formed part of the allowance for the year for which the election is made; and in applying that subsection as amended by this provision to any allowances, relief shall be deemed to be given in respect of an allowance carried forward from an earlier year before it is given in respect of an allowance arising in a later year.

(9) This section applies, with any necessary adaptations in relation to a profession, employment or vocation and in relation to the occupation of woodlands where the profits or gains thereof are assessable under Schedule D, as it applies in relation to a trade.