(1)M1Subject to subsection (2) below, a loss F1. . . shall not be available for relief under section 380 unless it is shown that, 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, F2. . . by any person in the exercise of functions conferred by or under any enactment (including an enactment contained in a local or private Act); F3. . .
(b)F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)M2Where 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 a trade is (or falls to be treated as being) carried on for a part only of a year of assessment by reason of its being (or falling to be treated as being) set up and commenced, or discontinued, or both, in that year, 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)F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)[F5M3There 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 under Chapter I of Part III of the Finance Act 1971 in respect of expenditure incurred on the provision of machinery or plant 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, [F6the 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)M4Subsection (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)M5Where relief has been given in a case to which subsection (6) above applies it shall be withdrawn by the making of an assessment under Case VI of Schedule D.
(9)M6For the purposes of subsection (1) above, the fact that a trade was being carried on at any time so as to afford a reasonable expectation of profit shall be conclusive evidence that it was then being carried on 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;
[F7and the Tax Acts shall have effect as if subsections (6) to (8) above were contained in Chapter V of Part II of the 1990 Act, and those subsections are without prejudice to section 142 of that Act.]
Textual Amendments
F1Words 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
F2Words 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
F3S. 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
F4S. 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)
F5Words 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)
F6Words 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)
F71990(C) s.164and Sch.1 para.8(14).Previously
“and subsection (6) above is without prejudice to section 41 of the Finance Act 1976”.
Marginal Citations
M1Source—1970 s.170(1)
M2Source—1970 s.170(2)-(4)
M3Source—1980 s.70(1), (5)
M4Source—1980 s.70(2), (5)
M5Source—1980 s.70(4)
M6Source—1970 s.170(5)(6); 1980 s.70(6)