PART X U.K. LOSS RELIEF AND GROUP RELIEF

CHAPTER I U.K. LOSS RELIEF: INCOME TAX

Modifications etc. (not altering text)

C1 Pt. 10 Chs. 1, 2 extended (with effect in accordance with s. 44 of the extending Act) by Finance Act 1998 (c. 36), Sch. 6 para. 2 (with Sch. 6 para. 6)

C2 Pt. 10 Chs. 1, 2 extended (with effect in accordance with s. 64, Sch. 22 paras. 16-18 of the extending Act) by Finance Act 2002 (c. 23), Sch. 22 para. 4(2)(d)

C3 Pt. 10 Ch. 1 modified (6.4.2005 with effect in accordance with s. 883(1) of the modifying Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 226, 227, 232(3) (with Sch. 2)

[F1 [F2 Losses from [F3 UK property] business or overseas property business] U.K.

Textual Amendments

F1 S. 379A and preceding cross-heading inserted (with effect in accordance with s. 39(4)(5) of the amending Act) by Finance Act 1995 (c. 4), Sch. 6 para. 19(1)

F2 S. 379A cross-heading substituted (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 5 para. 26 (with Sch. 5 para. 73)

F3 Words in cross-heading preceding s. 379A substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(8) (with Sch. 2)

379A [F4 Losses from UK property business]. U.K.

(1) Subject to the following provisions of this section, where for any year of assessment any person sustains any loss in a [F5 UK property business] carried on by him either solely or in partnership—

(a) the loss shall be carried forward to the following year of assessment and, to the extent that it does not exceed them, set against any [F6 profits] of that business for the year to which it is carried forward; and

(b) where there are no [F6 profits] for the following year or the [F6 profits] for that year are exceeded by the amount of the loss, the loss or, as the case may be, the remainder of it shall be so carried forward to the next following year, and so on.

(2) Subsection (3) below shall apply where a loss is sustained in a [F7 UK property business] for any year of assessment (“the year of the loss”) and one or both of the following conditions is satisfied, that is to say—

(a) the amount of the F8 . . . capital allowances treated as expenses of that business in computing that loss exceeds, by any amount (“the net capital allowances”), the amount of any charges under [F9 the Capital Allowances Act] which are treated as receipts of that business in computing that loss;

(b) the [F7 UK property business] has been carried on in relation to land that consists of or includes an agricultural estate to which allowable agricultural expenses deducted in computing that loss are attributable;

F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Where the person carrying on the [F11 UK property business] in a case to which this subsection applies makes a claim, in relation to the year of the loss or the year following that year, for relief under this subsection in respect of the loss—

(a) relief from income tax may be given, for the year to which the claim relates, on an amount of that person’s income for that year which is equal to the amount of relief available for that year in respect of the loss; and

(b) the loss which is to be or has been carried forward under subsection (1) above shall be treated as reduced (if necessary to nil) by an amount equal to the amount on which relief is given;

but a claim for relief under this subsection shall not be made after the end of twelve months from the 31st January next following the end of the year to which it relates and shall be accompanied by all such amendments as may be required by virtue of paragraph (b) above of any [F12 return made by the claimant under section 8 or 8A] of the Management Act.

(4) Subject to subsection (5) below, the reference in subsection (3) above to the amount of the relief available for any year in respect of a loss is a reference to whichever is the smallest of the following amounts, that is to say—

(a) the amount of the relievable income for the year to which the claim relates;

(b) the loss sustained in the [F13 UK property business] in the year of the loss; and

(c) the amount which, according to whether one or both of the conditions mentioned in subsection (2) above is satisfied in relation to the year of the loss, is equal—

(i) to the net capital allowances,

(ii) to the amount of the allowable agricultural expenses for the year of the loss, or

(iii) to the sum of the net capital allowances and the amount of those expenses.

(5) Where relief under subsection (3) above is given in respect of a loss in relation to either of the years in relation to which relief may be claimed in respect of that loss, relief shall not be available in respect of the same loss for the other year except, in a case where the relief already given is of an amount determined in accordance with subsection (4)(a) above, to the extent that the smaller of the amounts applicable by virtue of subsection (4)(b) and (c) above exceeds the amount of relief already given.

(6) For the purposes of subsection (4)(a) above the amount of relievable income for any year, in relation to any person, shall be equal to the amount of his income for that year—

(a) after effect has been given to subsection (1) above in relation to any amount carried forward to that year in respect of a loss sustained in any year before the year of the loss, and

(b) in the case of a claim under subsection (3) above in relation to the year of the loss, after effect has been given to any claim under that subsection in respect of a loss sustained in the preceding year.

(7) For the purposes of this section the loss sustained in any [F14 UK property business] shall be computed in like manner as the [F6 profits arising] from such a business are computed under the provisions of the Income Tax Acts [F15 applicable to UK property businesses].

(8) In this section “allowable agricultural expenses”, in relation to an agricultural estate, means any disbursements or expenses attributable to the estate which are deductible in respect of maintenance, repairs, insurance or management of the estate and otherwise than in respect of the interest payable on any loan.

(9) For the purposes of this section the amount of any disbursements or expenses attributable to an agricultural estate shall be determined as if—

(a) disbursements and expenses were to be disregarded to the extent that they would not have been attributable to the estate if it did not include the parts of it used wholly for purposes other than purposes of husbandry, and

(b) disbursements and expenses in respect of parts of the estate used partly for purposes of husbandry and partly for other purposes were to be reduced to an extent corresponding to the extent to which those parts were used for other purposes.

(10) In this section—

• “agricultural estate” means any land (including any houses or other buildings) which is managed as one estate and which consists of or includes any agricultural land; and

• “agricultural land” means land, houses or other buildings in the United Kingdom occupied wholly or mainly for the purposes of husbandry.

Textual Amendments

F4 S. 379A sidenote substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by virtue of Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(7) (with Sch. 2)

F5 Words in s. 379A(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(2) (with Sch. 2)

F6 Words in s. 379A(1)(a)(b)(7) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3), Sch. 7 para. 1

F7 Words in s. 379A(2) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(3) (with Sch. 2)

F8 Word in s. 379A(2)(a) repealed (with effect in accordance with Sch. 15 para 9(1) of the repealing Act) by Finance Act 1997 (c. 16), Sch. 15 para. 2(1)(a), Sch. 18 Pt. 6(11), Note

F9 Words in s. 379A(2)(a) substituted (with effect in accordance with s. 579(1) of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 28 (with Sch. 3)

F10 Words in s. 379A(2) repealed (with effect in accordance with Sch. 15 para 9(1) of the repealing Act) by Finance Act 1997 (c. 16), Sch. 15 para. 2(1)(b), Sch. 18 Pt. 6(11), Note

F11 Words in s. 379A(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(4) (with Sch. 2)

F12 Words in s. 379A(3) substituted (with effect in accordance with s. 88(3) of the amending Act) by Finance Act 2001 (c. 9), Sch. 29 para 35(2)

F13 Words in s. 379A(4)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(5) (with Sch. 2)

F14 Words in s. 379A(7) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(6)(a) (with Sch. 2)

F15 Words in s. 379A(7) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 156(6)(b) (with Sch. 2)

Modifications etc. (not altering text)

C4 S. 379A restricted (1.5.1995) by Finance Act 1995 (c. 4), s. 41(8)

C5 S. 379A(1) applied (with effect in accordance with s. 39(4)(5) of the affecting Act) by Finance Act 1995 (c. 4), Sch. 6 para. 19(2)(3)

C6 S. 379A(3) applied (with effect in accordance with s. 39(4)(5) of the modifying Act) Finance Act 1995 (c. 4), Sch. 6 para. 19(4)

[F16 379B Losses from overseas property business.] U.K.

The provisions of section 379A apply in relation to an overseas property business [F17 (within the meaning given by Chapter 2 of Part 3 of ITTOIA 2005)] as they apply in relation to a [F18 UK property business].]

Textual Amendments

F16 S. 379B inserted (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 5 para. 27 (with Sch. 5 para. 73)

F17 Words in s. 379B inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 157(a) (with Sch. 2)

F18 Words in s. 379B substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 157(b) (with Sch. 2)

Trade etc. losses U.K.

380 Set-off against general income. U.K.

[F19 (1) Where in any year of assessment any person sustains a loss in any trade, profession, vocation or employment carried on by him either solely or in partnership, he may, by notice given within twelve months from the 31st January next following that year, make a claim for relief from income tax on—

(a) so much of his income for that year as is equal to the amount of the loss or, where it is less than that amount, the whole of that income; or

(b) so much of his income for the last preceding year as is equal to that amount or, where it is less than that amount, the whole of that income;

but relief shall not be given for the loss or the same part of the loss both under paragraph (a) and under paragraph (b) above.

(2) Any relief claimed under paragraph (a) of subsection (1) above in respect of any income shall be given in priority to any relief claimed in respect of that income under paragraph (b) of that subsection.]

(3) F20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F21 (4) M1 This section applies in relation to losses sustained in the occupation of woodlands in respect of which a person has elected under [F22 paragraph 4 of Schedule 6 to the Finance Act 1988] to be charged to income tax under Schedule D as it applies in relation to losses sustained in a trade.

Textual Amendments

F19 S. 380(1)(2) substituted (with effect in accordance with s. 218 of the amending Act) by Finance Act 1994 (c. 9), s. 209(1) (with Sch. 20)

F20 S. 380(3) repealed (with effect in accordance with s. 215(4)(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 216(3)(b), Sch. 26 Pt. 5(24), Note 4(a) (as s. 215(5) of that Act is modified (1.5.1995) by 1995 c. 4, s. 125(1)) (with Sch. 20)

F21 See 1988(F) s.148and Sch.14 Part Vregarding repeal of s.380(4)from 6April 1993.

F22 1988(F) Sch.6 para.8from 15March 1988.Previously

“section 54”.

Modifications etc. (not altering text)

C7 S. 380 amended (27.7.1993 with effect for the year 1992-93 and subsequent years of assessment) by 1993 c. 34, ss. 171 (3), 184(3)

C8 S. 380(1) modified (1991-92) by The Lloyd's Underwriters (Tax) (1991-92) Regulations 1994 (S.I. 1994/728), regs. 1, 9, Sch. 2

C9 S. 380(1) modified (3.5.1994) by Finance Act 1994 (c. 9), Sch. 20 para. 8

C10 S. 380(1) modified (1992-93, 1993-94 and 1994-5) by The Lloyd's Underwriters (Tax) (1992-93 to 1996-97) Regulations 1995 (S.I. 1995/352), regs. 1, 14, 15, Sch.

C11 See—1990(C) s.142—restriction of set off of first-year allowances.

Marginal Citations

M1 Source—1970 s.168(8)

381 Further relief for individuals for losses in early years of trade. U.K.

(1) M2 Where an individual carrying on a trade sustains a loss in the trade in—

(a) the year of assessment in which it is first carried on by him; or

(b) any of the next three years of assessment;

he may, by notice given [F23 on or before the first anniversary of the 31st January next following] the year of assessment in which the loss is sustained, make a claim for relief under this section.

(2) M3 Subject to section 492 and this section, relief shall be given under subsection (1) above from income tax on [F24 so much of the claimant’s income as is equal to the amount of the loss or, where it is less than that amount, the whole of that income], being income for the three years of assessment last preceding that in which the loss is sustained, taking income for an earlier year before income for a later year.

(3) M4 Relief shall not be given for the same loss or the same portion of a loss both under subsection (1) above and under any other provision of the Income Tax Acts.

(4) M5 Relief shall not be given under subsection (1) above in respect of a loss sustained in any period unless F25 . . . the trade was carried on throughout that period on a commercial basis and in such a way that profits in the trade (or, where the carrying on of the trade forms part of a larger undertaking, in the undertaking as a whole) could reasonably be expected to be realised in that period or within a reasonable time thereafter.

(5) Relief shall not be given under subsection (1) above in respect of a loss sustained by an individual in a trade if—

(a) at the time when it is first carried on by him he is married to [F26 , or a civil partner of, another individual with whom he is living together and] who has previously carried on the trade; and

(b) the loss is sustained in a year of assessment later than the third year of assessment after that in which the trade was first carried on by the other individual.

(6) F27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) M6 This section applies, with the necessary modifications, in relation to a profession or vocation as it applies in relation to a trade.

Textual Amendments

F23 Words in s. 381(1) substituted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 10

F24 Words in s. 381(2) substituted (with effect in accordance with s. 218 of the amending Act) by Finance Act 1994 (c. 9), s. 209(2) (with Sch. 20)

F25 Words in s. 381(4) repealed (with effect in accordance with s. 134(2) of the repealing Act) by Finance Act 1996 (c. 8), Sch. 20 para. 24, Sch. 41 Pt. 5(10), Note

F26 Words in s. 381(5)(a) substituted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 70

F27 S. 381(6) repealed (with effect in accordance with s. 215(4)(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 216(3)(c), Sch. 26 Pt. 5(24), Note 4(a) (as s. 215(5) of that Act is modified (1.5.1995) by 1995 c. 4, s. 125(1)) (with Sch. 20)

Modifications etc. (not altering text)

C12 S. 381(1) modified for the year of assessment 1988-89 by S.I. 1991/851, reg. 9, Sch.2.

S. 381(1) modified (for the year of assessment 1989-90 only) (28.3.1992) by S.I. 1992/511, reg. 9, Sch.2.

C13 S. 381(1) applied with modification (23.3.1993) by S.I. 1993/415, reg. 9, Sch.2

C14 S. 381(1) modified (1991-92) by The Lloyd's Underwriters (Tax) (1991-92) Regulations 1994 (S.I. 1994/728), regs. 1, 9, Sch. 2

C15 S. 381(1) modified (1992-93, 1993-94 and 1994-5) by The Lloyd's Underwriters (Tax) (1992-93 to 1996-97) Regulations 1995 (S.I. 1995/352), regs. 1, 14, 15, Sch.

C16 See S.I. 1987 No.530 (in Part III Vol.5) regn. 15—non-resident entertainers and sportsmen.

C17 See 1990(C) s.142—restriction of set-off of first-year allowances.

Marginal Citations

M2 Source—1978 s.30(1)

M3 Source—1978 s.30(2)

M4 Source—1978 s.30(3)

M5 Source—1978 s.30(4)-(6)

M6 Source—1978 s.30(10)

382 Provisions supplementary to sections 380 and 381. U.K.

(1) M7 A claim for relief under section 380or 381may require that the relief be given only by reference to the income of the person sustaining the loss, without extending to the income of that person’s wife or husband.

(2) M8 Subject to any requirement under subsection (1)above, relief under section 380or 381shall be given in respect of a loss sustained by any person by treating the loss as reducing first his income of the corresponding class, then his other income, then the income of the corresponding class of that person’s wife or husband, then the other income of the wife or husbandF28 .

• For the purposes of this subsection “income of the corresponding class” means earned or unearned income according as income arising during the same period as the loss to the person sustaining it from profits or gains of the same trade, profession, vocation or employment would have been that person’s earned or unearned income.

[F29 (3) Subject to subsection (4) below, for the purposes of sections 380 and 381, the amount of a loss sustained in a trade, profession or vocation shall be computed in like manner and in respect of the same period as the [F30 profits arising] from the trade, profession or vocation are computed F31 . . . .

(4) An amount of a loss which, apart from this subsection, would fall to be included in the computations for two successive years of assessment shall not be included in the computation for the second of those years.]

Textual Amendments

F28 Repealed by 1988(F) s.148and Sch.14 Part VIIIfor 1990-91and subsequent years.

F29 S. 382(3)(4) substituted (with effect in accordance with ss. 209(7), 218 of the amending Act) by Finance Act 1994 (c. 9), s. 209(3) (with Sch. 20)

F30 Words in s. 382(3) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3), Sch. 7 para. 1

F31 Words in s. 382(3) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 158, Sch. 3 (with Sch. 2)

Marginal Citations

M7 Source—1970 s.168(3); 1971 s.16(2)(a); 1978 s.30(7)(a)

M8 Source—1970 s.168(4); 1978 s.30(7)(a)

383 Extension of right of set-off to capital allowances. U.K.

F32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F32 S. 383 repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(b), Sch. 26 Pt. 5(24), Note 5

384 Restrictions on right of set-off. U.K.

(1) M9 Subject to subsection (2) below, a loss F33 . . . shall not be available for relief under section 380 unless F34 . . . , for the year of assessment in which the loss is claimed to have been sustained, the trade was being carried on on a commercial basis and with a view to the realisation of profits in the trade or, where the carrying on of the trade formed part of a larger undertaking, in the undertaking as a whole.

(2) Subsection (1) above shall not apply—

(a) to a loss made F35 . . . by any person in the exercise of functions conferred by or under any enactment (including an enactment contained in a local or private Act); F36 . . .

(b) F36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) M10 Where during a year of assessment there is a change in the manner in which a trade is being carried on, it shall be treated for the purposes of this section as having been carried on throughout the year in the way in which it was being carried on by the end of the year.

(4) Subject to subsection (5) below, where

[F37 (a) a trade is carried on for part only of a year of assessment by reason of its being set up and commenced, or discontinued, or both, in that year, or

(b) a person carries on, or is treated as carrying on, a trade for part only of a year of assessment by reason of—

(i) a succession to the trade during the year which involves all the persons carrying it on before the succession permanently ceasing to carry it on, or

(ii) a change of residence within section 17 of ITTOIA 2005,

subsections (1) to (3) above] shall have effect in relation to the trade as regards that part of that year as if any reference to the manner of carrying on the trade for or by the end of that year were a reference to the manner of carrying it on for or by the end of that part of that year.

(5) F38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) [F39 M11 There shall be disregarded for the purposes of sections 380 and 381 so much of any loss as derives from any allowances] made to an individual [F40 under Part 2 of the Capital Allowances Act in respect of expenditure incurred on the provision of plant or machinery] for leasing in the course of a trade unless—

(a) the trade is carried on by him (alone or in partnership) for a continuous period of at least six months in, or beginning or ending in, [F41 the year of assessment in which the loss was sustained]; and

(b) he devotes substantially the whole of his time to carrying it on (alone or in partnership) throughout that year or if it is set up or permanently discontinued (or both) in that year, for a continuous period of at least six months beginning or ending in that year.

(7) M12 Subsection (6) above shall apply also to expenditure incurred by an individual on the provision for the purposes of a trade carried on by him (alone or in partnership) of an asset which is not to be leased if payments in the nature of royalties or licence fees are to accrue from rights granted by him in connection with that asset.

(8) M13 Where relief has been given in a case to which subsection (6) above applies it shall be withdrawn by the making of an assessment [F42 to income tax].

[F43 (9) Where at any time a trade is carried on so as to afford a reasonable expectation of profit, it shall be treated for the purposes of subsection (1) above as being carried on at that time with a view to the realisation of profits.]

(10) Subsections (1) to (5) and (9) above—

(a) apply to professions and vocations as they apply to trades, with references to a commercial basis construed accordingly; and

(b) have effect without prejudice to section 397;

F44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F45 (11) Expressions used in subsections (6) to (8) and in Part 2 of the Capital Allowances Act have same meaning in those subsections as in that Part; and those subsections are without prejudice to section 384A.]

Textual Amendments

F33 Words in s. 384(1) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(c), Sch. 26 Pt. 5(24), Note 5

F34 Words in s. 384(1) repealed (with effect in accordance with s. 134(2) of the repealing Act) by Finance Act 1996 (c, 8), Sch. 20 para. 25(1), Sch. 41 Pt. 5(10), Note

F35 Words in s. 384(2)(a) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(c), Sch. 26 Pt. 5(24), Note 5

F36 S. 384(2)(b) and preceding word repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(c), Sch. 26 Pt. 5(24), Note 5

F37 S. 384(4)(a)(b) and words substituted for words in s. 384 (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 159(2) (with Sch. 2)

F38 S. 384(5) repealed (with effect in accordance with s. 215(4)(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 216(3)(d), Sch. 26 Pt. 5(24), Note 4(b) (as s. 215(5) of that Act is modified (1.5.1995) by 1995 c. 4, s. 125(1)) (with Sch. 20)

F39 Words in s. 384(6) substituted (with effect in accordance with ss. 211(2), 218 of the amending Act) by Finance Act 1994 (c. 9), s. 214(2)(a)

F40 Words in s. 384(6) substituted (with effect in accordance with s. 579(1) of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 29(1) (with Sch. 3)

F41 Words in s. 384(6)(a) substituted (with effect in accordance with ss. 211(2), 218 of the amending Act) by Finance Act 1994 (c. 9), s. 214(2)(b)

F42 Words in s. 384(8) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 159(3) (with Sch. 2)

F43 S. 384(9) substituted (with effect in accordance with s. 134(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 20 para. 25(2)

F44 Words in s. 384(10) repealed (with effect in accordance with s. 579(1) of the repealing Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 29(2), Sch. 4 (with Sch. 3)

F45 S. 384(11) inserted (with effect in accordance with s. 579(1) of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 29(2) (with Sch. 3)

Marginal Citations

M9 Source—1970 s.170(1)

M10 Source—1970 s.170(2)-(4)

M11 Source—1980 s.70(1), (5)

M12 Source—1980 s.70(2), (5)

M13 Source—1980 s.70(4)

[F46 384A Restriction of set-off of allowances against general income U.K.

(1) Relief shall not be given to an individual under sections 380 and 381 by reference to a first-year allowance under Part 2 of the Capital Allowances Act (plant and machinery allowances) in the circumstances specified in subsection (2) or (4) below.

(2) The circumstances are that the allowance is in respect of expenditure incurred on the provision of plant or machinery for leasing in the course of a qualifying activity and—

(a) at the time when the expenditure was incurred, the qualifying activity was carried on by the individual in question in partnership with a company (with or without other partners), or

(b) a scheme has been effected or arrangements have been made (whether before or after that time) with a view to the qualifying activity being so carried on by that individual.

(3) For the purposes of subsection (2) above letting a ship on charter shall be regarded as leasing it if, apart from this subsection, it would not be so regarded.

(4) The circumstances are that the allowance is made in connection with—

(a) a qualifying activity which at the time when the expenditure was incurred was carried on by the individual in partnership or which has subsequently been carried on by him in partnership or transferred to a person who was connected with him, or

(b) an asset which after that time has been transferred by the individual to a person who was connected with him or, at a price lower than its market value, to any other person,

and the condition in subsection (5) below is met.

(5) The condition is that a scheme has been effected or arrangements have been made (whether before or after the time referred to in subsection (4) above) such that the sole or main benefit that might be expected to accrue to the individual from the transaction under which the expenditure was incurred was the obtaining of a reduction in tax liability by means of relief under sections 380 and 381.

(6) Where relief has been given in circumstances in which subsection (1) applies it shall be withdrawn by the making of an assessment [F47 to income tax].

(7) Section 839 (how to tell whether persons are connected) applies for the purposes of subsection (4) above.

(8) Expressions used in this section and in Part 2 of the Capital Allowances Act have the same meaning as in that Part.]

Textual Amendments

F46 S. 384A inserted (with effect in accordance with s. 579(1) of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 30 (with Sch. 3)

F47 Words in s. 384A(6) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 160 (with Sch. 2)

385 Carry-forward against subsequent profits. U.K.

[F48 (1) Where a person has, in any trade, profession or vocation carried on by him either alone or in partnership, sustained a loss (to be computed as mentioned in subsections (3) and (4) of section 382) in respect of which relief has not been wholly given either under section 380 or any provision of the Income Tax Acts—

(a) he may make a claim requiring that any part of the loss for which relief has not been so given shall be set off for the purposes of income tax against the income of the trade, profession or vocation for subsequent years of assessment; and

(b) where he makes such a claim, the income from the trade, profession or vocation in any subsequent year of assessment shall be treated as reduced by that part of the loss, or by so much of that part as cannot, on that claim, be relieved against such income of an earlier year of assessment.]

(2) F49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) F50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Where in any year of assessment relief cannot be given, or cannot be wholly given, in respect of a loss carried forward under this section because the amount of the [F51 profits] of the trade assessed F52 . . . for that year is insufficient, any interest or dividends being interest or dividends—

(a) on investments arising in that year, and

(b) which would fall to be taken into account as trading receipts in computing the [F51 profits] of the trade for the purposes of assessment F52 . . . but for the fact that they have been subjected to tax under other provisions of the Income Tax Acts,

shall be treated for the purposes of the application of this section as if they were [F51 profits] on which the person carrying on the trade was assessed F52 . . . in respect of that trade for that year of assessment, and relief shall be given accordingly by repayment or otherwise.

(5) F53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F54 (6) Where a loss is sustained by a person in the occupation of woodlands, and that person, if he had made a profit, would by reason of his election under [F55 paragraph 4 of Schedule 6 to the Finance Act 1988] have been chargeable for the following year to income tax under Schedule D computed on the amount of that profit, this section shall apply so as to give relief in respect of that loss in the same manner, and to the same extent, as if it were a loss sustained in a trade.

(7) In so far as relief in respect of any loss has been given to any person under this section, that person shall not be entitled to claim relief in respect of that loss under any other provision of the Income Tax Acts.

(8) F56 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F48 S. 385(1) substituted (with effect in accordance with ss. 209(7), 218 of the amending Act) by Finance Act 1994 (c. 9), s. 209(4) (with Sch. 20)

F49 S. 385(2) repealed (with effect in accordance with s. 215(4)(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 216(3)(e), Sch. 26 Pt. 5(24), Note 4(c) (as s. 215(5) of that Act is modified (1.5.1995) by 1995 c. 4, s. 125(1)) (with Sch. 20)

F50 S. 385(3) repealed (with effect in accordance with ss. 209(7), 218 of the repealing Act) by Finance Act 1994 (c. 9), s. 209(5), Sch. 26 Pt. 5(24), Note 6

F51 Words in s. 385(4) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3), Sch. 7 para. 1

F52 Words in s. 385(4) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 161, Sch. 3 (with Sch. 2)

F53 S. 385(5) repealed (with effect in accordance with s. 215(4)(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 216(3)(e), Sch. 26 Pt. 5(24), Note 4(c) (as s. 215(5) of that Act is modified (1.5.1995) by 1995 c. 4, s. 125(1)) (with Sch. 20)

F54 See 1988(F) Sch.14 Part V—repeal of subs. (6)from 6April 1993.

F55 1988(F) Sch.6 para.6(8)from 15March 1988.Previously

“section 54”.

F56 S. 385(8) repealed (with effect in accordance with ss. 209(7), 218 of the repealing Act) by Finance Act 1994 (c. 9), s. 209(5), Sch. 26 Pt. 5(24), Note 6

Modifications etc. (not altering text)

C18 S. 385 modified (with effect in accordance with s. 56(9) of the amending Act) by Finance Act 1998 (c. 36), s. 56(4)

C19 S. 385 modified by Finance Act 1993 (c. 34), Sch. 20A paras. 6-8 (as inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 25 para. 3)

386 Carry-forward where business transferred to a company. U.K.

(1) M14 Where—

(a) a business carried on by any individual, or any individuals in partnership, has been transferred to a company in consideration solely or mainly of the allotment of shares in the company to that individual or those individuals; and

(b) in the case of any individual to whom, or to whose nominee or nominees, shares have been so allotted, his total income for any year of assessment throughout which he is the beneficial owner of the shares, and throughout which the company carries on the business, includes any income derived by him from the company, whether by way of dividends on those shares or otherwise;

then, subject to subsection (2) below, section 385 (except subsection (5)) shall apply as if the income so derived were [F57 profits] on which that individual was assessed F58 . . . in respect of that business for that year.

(2) Where under section 385 as applied by subsection (1) above a loss falls to be deducted from or set off against any income for any year of assessment, the deduction or set-off shall be made in the first place against that part, if any, of the income in respect of which the individual has been, or is liable to be, assessed to tax for that year.

(3) This section, in its application to the year of assessment in which a business is transferred, shall have effect as if, for the reference in subsection (1)(b) to the year of assessment throughout which the individual is the beneficial owner of the shares and the business is carried on by the company, there were substituted a reference to the period from the date of the transfer to the following 5th April.

(4) F59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F57 Words in s. 386(1) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3), Sch. 7 para 1

F58 Words in s. 386(1) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 162, Sch. 3 (with Sch. 2)

F59 S. 386(4) repealed (with effect in accordance with s. 215(4)(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 216(3)(f), Sch. 26 Pt. 5(24), Note 4(a) (as s. 215(5) of that Act is modified (1.5.1995) by 1995 c. 4, s. 125(1)) (with Sch. 20)

Marginal Citations

M14 Source—1970 s.172

387 Carry-forward as losses of amounts taxed under section 350. U.K.

(1) M15 Subject to the provisions of this section, where under section 350 a person has been assessed to income tax in respect of a payment made wholly and exclusively for the purposes of a trade, profession or vocation, the amount on which tax has been paid under that assessment shall be treated for the purposes of sections 385 and 386 as though it were a loss sustained in that trade, profession or vocation, and relief in respect of the loss shall be allowed accordingly.

(2) Relief shall not be allowed by virtue of this section in respect of any payment, or part of a payment, which is not ultimately borne by the person assessed, or which is charged to capital.

(3) This section shall not apply—

(a) M16 to any payment falling within section 349(2);

(b) M17 to any payment falling within section 349 by virtue of section 43(1);

(c) F60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) to any capital sum paid in respect of any patent rights assessed [F61 under section 349(1) of this Act by virtue of section 595 of ITTOIA 2005];

(e) to any payment of, or on account of, copyright royalties to which section 536 applies [F62 or royalties in respect of a right in a design to which section 537B applies];F63 . . .

(f) F63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F60 S. 387(3)(c) repealed (with effect in accordance with Sch. 18 Pt. 6(2) Note of the repealing Act) by Finance Act 1997 (c. 16), Sch. 18 Pt. 6(2)

F61 Words in s. 387(3)(d) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 163 (with Sch. 2)

F62 Sch.7 para.36(4) Copyright, Designs and Patents Act 1988 (c.48)from 1August 1989. (Commencement order—S.I. 1989 No.816—not reproduced.)

F63 S. 387(3)(f) and preceding word repealed (with effect in accordance with Sch. 18 Pt. 6(10) Note 3 of the repealing Act) by Finance Act 1997 (c. 16), Sch. 18 Pt. 6(10); S.I. 1997/991, art. 2

Marginal Citations

M15 Source—1970 s.173(1), (2)

M16 Source—1970 s.173(3)(aa); 1970(F) Sch.4 9(6)

M17 Source—1970 s.173(3)(a)-(c)

388 Carry-back of terminal losses. U.K.

(1) M18 Where a trade, profession or vocation is permanently discontinued in the year 1988-89 or any later year, and any person then carrying it on, either alone or in partnership, has sustained therein a loss to which this section applies (“a terminal loss”), that person may, subject to the provisions of this section and of section 389, make a claim requiring that the amount of the terminal loss shall, as far as may be, be deducted from or set off against the amount of [F64 profits] on which he has been charged to income tax F65 . . . in respect of the trade, profession or vocation for [F66 the year of assessment in which the discontinuance occurs and the three years last preceding it]; and there shall be made all such reductions of assessments or repayments of tax as may be necessary to give effect to the claim.

(2) Relief shall not be given in respect of the same matter both under this section and under some other provision of the Income Tax Acts.

(3) M19 Any relief under this section shall be given as far as possible from the assessment for a later rather than an earlier year.

(4) Where—

(a) a claim under this section is made in respect of a terminal loss sustained in a trade, and

(b) relief cannot be given, or cannot be wholly given, against the [F64 profits] of the trade charged to income tax F65 . . . for any year because the amount of those [F64 profits] is insufficient,

any relevant interest or dividends arising in that year shall be treated for the purposes of the application of this section as if they were [F64 profits] on which the person carrying on the trade was assessed F65 . . . in respect of that trade for that year of assessment, and relief shall be given accordingly by repayment or otherwise.

• For the purposes of this subsection “any relevant interest or dividends” means interest or dividends which would fall to be taken into account as trading receipts in computing the [F64 profits] of the trade for the purpose of assessment F65 . . . but for the fact that they have been subjected to tax under other provisions of the Income Tax Acts.

(5) The [F64 profits] on which a person or partnership has been charged to income tax for any year of assessment shall be treated for the purposes of any relief under this section from the assessment for that year as reduced by the amount of those [F64 profits] applied in making any payment from which income tax was deducted, but was not accounted for because the payment was made out of profits or gains brought into charge to income tax; and the like reduction shall be made in the amount of the terminal loss for which relief may be given under this section from the assessments for earlier years unless the payment was one which, if not made out of profits or gains brought into charge to income tax—

(a) could have been assessed to income tax under section 350, and

(b) if so assessed, could have been treated as a loss by virtue of section 387.

(6) The question whether a person has sustained any and, if so, what terminal loss in a trade, profession or vocation shall be determined for the purposes of this section by taking the amounts (if any) of the following, in so far as they have not otherwise been taken into account so as to reduce or relieve any charge to tax—

(a) the loss sustained by him in the trade, profession or vocation in the year of assessment in which it is permanently discontinued;

(b) F67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) the loss sustained by him in the trade, profession or vocation in the part of the preceding year of assessment beginning 12 months before the discontinuance; F67 . . .

(d) F67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) F68 . . . For the purposes of paragraphs (a) and (c) of that subsection the amount of a loss shall, subject to the provisions of this section, be computed in the same way as [F64 profits][F69 of a trade, profession or vocation under Part 2 of ITTOIA 2005].

Textual Amendments

F64 Words in s. 388(1)(4)(5)(7) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3), Sch. 7 para. 1

F65 Words in s. 388(1)(4) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 164(2)(3), Sch. 3 (with Sch. 2)

F66 Words in s. 388(1) substituted (with effect in accordance with s. 218 of the amending Act) by Finance Act 1994 (c. 9), s. 209(6) (with Sch. 20)

F67 S. 388(6)(b)(d) (and word preceding (d)) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(d), Sch. 26 Pt. 5(24), Note 5(a) (with Sch. 20)

F68 Words in s. 388(7) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(d), Sch. 26 Pt. 5(24), Note 5(a) (with Sch. 20)

F69 Words in s. 388(7) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 164(4) (with Sch. 2)

Modifications etc. (not altering text)

C20 S. 388 restricted (9.3.1995 with effect in accordance with reg. 1 of the affecting S.I.) by The Lloyd's Underwriters (Tax) Regulations 1995 (S.I. 1995/351), reg. 14(3)

C21 S. 388 modified (1.12.1997 with effect in accordance with reg. 1 of the affecting S.I.) by The Lloyd's Underwriters (Scottish Limited Partnerships) (Tax) Regulations 1997 (S.I. 1997/2681), reg. 10

C22 See 1990(C) ss.30-31(ships)—carry forward does not include postponement under 1990(C) ss.30-31.

Marginal Citations

M18 Source—1970 s.174(1)

M19 Source—1970 s.174(2)-(6)

389 Supplementary provisions relating to carry-back of terminal losses. U.K.

(1) M20 Sections 387, 458 and 474 shall apply to the computation of losses, or of profit or loss, for any purpose of this section or section 388 as they apply to any such computation for the corresponding purposes of section 385.

(2) Where on the permanent discontinuance of a trade which consists of or includes the working of a mine, oil well or other source of mineral deposits within the meaning of [F70 Part 5 of the Capital Allowances Act], a claim for relief is made both under section 388 above and [F71 section 355 of that Act] (carry-back of balancing allowances), the balancing allowance in respect of which the claim is made under [F72 section 355] shall be left out of account for the purposes of section 388(6), but relief under section 388 shall be given in priority to relief under [F72 section 355].

(3) F73 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F74 (4) For the purposes of this section and section 388 references to the permanent discontinuance of a trade, profession or vocation include—

(a) a person permanently ceasing to carry on a trade, profession or vocation, and

(b) a partner permanently ceasing to carry on a notional trade in accordance with section 852(4) of ITTOIA 2005.]

(5) F75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) F75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) F75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F76 (8) Where a person occupying woodlands has elected to be charged to income tax in respect thereof under Schedule D, this section and section 388 shall apply to a terminal loss sustained by him in the occupation of the woodlands as they apply to a terminal loss sustained in a trade.

Textual Amendments

F70 Words in s. 389(2) substituted (with effect in accordance with s. 579(1) of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 31(a) (with Sch. 3)

F71 Words in s. 389(2) substituted (with effect in accordance with s. 579(1) of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 31(b) (with Sch. 3)

F72 Words in s. 389(2) substituted (with effect in accordance with s. 579(1) of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 31(c) (with Sch. 3)

F73 S. 389(3) repealed (with effect in accordance with s. 215(4)(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 216(3)(g), Sch. 26 Pt. 5(24), Note 4(d) (as s. 215(5) of that Act is modified (1.5.1995) by 1995 c. 4, s. 125(1)) (with Sch. 20)

F74 S. 389(4) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 165 (with Sch. 2)

F75 S. 389(5)-(7) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(e), Sch. 26 Pt. 5(24), Note 5(c) (with Sch. 20)

F76 See 1988(F) Sch.14 Part Vfor repeal of subs. (8)from 6April 1993.

Marginal Citations

M20 Source—1970 s.174(7)-(13); 1986 Sch.13 27; 1971 Sch.8 16

390 Treatment of interest as a loss for purposes of carry-forward and carry-back. U.K.

M21 Where—

(a) a payment of interest eligible for relief under section 353 is money wholly and exclusively laid out or expended for the purposes of a trade, profession or vocation [F77 carried on wholly or partly in the United Kingdom], and

(b) full effect cannot be given to such relief in respect of the payment by reason of a want or deficiency of income of the year of assessment in which the payment is made,

the amount unallowed may be carried forward to succeeding years of assessment as if it were a loss carried forward under section 385, or may be treated for the purposes of sections 388 and 389 as a loss sustained at the date of payment.

Textual Amendments

F77 Words in s. 390(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 166 (with Sch. 2)

Marginal Citations

M21 Source—1970 s.175; 1972 Sch.11 3; 1974 Sch.1 28

[F78 391 Losses from trade etc. carried on abroad U.K.

In the case of a loss sustained in a trade, profession or vocation carried on wholly outside the United Kingdom, relief under any of sections 380 to 386, 388 and 389 is given only on—

(a) the profits of a trade, profession or vocation carried on wholly outside the United Kingdom, or

(b) income falling within section 23, 355, 575, 613, 615, 631 or 635 of ITEPA 2003,

but no relief is to be given on income which is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).]

Textual Amendments

F78 S. 391 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 167 (with Sch. 2)

Case VI losses U.K.

[F79 392 Losses from miscellaneous transactions U.K.

(1) A person may make a loss relief claim if —

(a) in any year of assessment he sustains a loss in any transaction (whether he was engaged in it solely or in partnership), and

(b) the transaction is of such a nature that, if any profits or other income had arisen from it, he would have been liable to be assessed to income tax in respect of the income under or by virtue of any provision to which section 836B applies.

(2) A loss relief claim is a claim requiring—

(a) that the amount of the loss sustained by him is, as far as may be, to be deducted from or set off against the total of the amount of any profits or other income or gains arising from any transaction in respect of which he is assessed for that year under or by virtue of any such provision, and

(b) that any portion of the loss for which relief is not so given is, as far as may be, to be carried forward and deducted from or set off against the total of the amount of any profits or other income or gains arising from any transaction in respect of which he is assessed for a subsequent year of assessment under or by virtue of any such provision.

(3) If a partner in a partnership sustains a loss, the expression “the amount of any profits or other income or gains arising from any transaction in respect of which he is assessed” is to be read in accordance with subsection (4).

(4) In respect of any year that expression means such portion of the amount on which the partnership is assessed under or by virtue of any provision to which section 836B applies in respect of any transaction as falls to be taken into account in computing the partner's total income for that year.

(5) Any relief under this section by way of the carrying forward of the loss is to be given as far as possible—

(a) from the first subsequent assessment in respect of any profits or other income or gains arising from any transaction in respect of which he is assessed under or by virtue of any provision to which section 836B applies for any year, and

(b) so far as it cannot be so given, from the next such assessment, and so on.

(6) So far as a loss relief claim concerns the amount of the loss for any year of assessment it must be made on or before the fifth anniversary of the 31st January next following the year of assessment in question.

(7) But the question whether and, if so, how much relief on that amount should be given under this section against tax for any year of assessment may be the subject of a separate claim made on or before the fifth anniversary of the 31st January next following that year of assessment.

(8) Any portion of a loss sustained by any person in any transaction (whether he was engaged in it solely or in partnership)—

(a) which was of such a nature that, if any profits had arisen from it, he would have been liable to be assessed to income tax in respect of the profits under Case VI of Schedule D for any year of assessment before the year 2005-06, and

(b) which did not fall within section 34, 35 or 36,

is (so far as relief for that portion has not previously been given) to be treated as a loss to be carried forward and deducted in accordance with subsection (2)(b) above.]

Textual Amendments

F79 S. 392 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 168 (with Sch. 2)