Income Tax Act 2007 (c. 3)

Part 4 U.K. Loss relief

Chapter 4 U.K. Losses from property businesses

[F1 Restrictions on relief U.K.

Textual Amendments

F1 S. 127A and cross-heading inserted (8.4.2010 with effect in accordance with s. 25(5)-(7) of the amending Act) by Finance Act 2010 (c. 13), s. 25(4)

127A No relief for tax-generated losses attributable to annual investment allowance U.K.

(1) This section applies if—

(a) in a tax year a person makes a loss in a UK property business or overseas property business (whether carried on alone or in partnership),

(b) the loss has a capital allowances connection (see section 123(2)), and

(c) the loss arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.

(2) No property loss relief against general income may be given to the person for so much of the applicable amount of the loss as is attributable to an annual investment allowance.

(3) For the purposes of subsection (2), the applicable amount of the loss is to be treated as attributable to capital allowances before anything else and to an annual investment allowance before any other capital allowance.

(4) 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 being in a position to make use of an annual investment allowance in the obtaining of a reduction in tax liability by means of property loss relief against general income.

(5) In subsection (4) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6) In this section “the applicable amount of the loss” has the meaning given by section 122.]

[F2 127B No relief for tax-generated agricultural expenses U.K.

(1) This section applies if—

(a) in a tax year a person makes a loss in a UK property business or overseas property business (whether carried on alone or in partnership),

(b) the business has a relevant agricultural connection for the purposes of section 120 (see section 123(3) to (7)), and

(c) any allowable agricultural expenses deducted in calculating the loss arise directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.

(2) No property loss relief against general income may be given to the person for so much of the applicable amount of the loss as is attributable to expenses falling within subsection (1)(c).

(3) For the purposes of subsection (2), the applicable amount of the loss is to be treated as attributable to expenses falling within subsection (1)(c) before anything else.

(4) 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 property loss relief against general income.

(5) In subsection (4) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6) In this section “the applicable amount of the loss” has the meaning given by section 122 and “allowable agricultural expenses” has the meaning given by section 123.]

Textual Amendments

F2 S. 127B inserted (17.7.2012) (with effect in accordance with s. 10(5)-(7) of the amending Act) by Finance Act 2012 (c. 14), s. 10(4)

[F3 127BA Restriction of relief: cash basis U.K.

(1) This section applies if—

(a) in a tax year a person makes a loss in a UK property business or overseas property business (whether carried on alone or in partnership), and

(b) the profits of the business are calculated on the cash basis for the tax year (see section 271D of ITTOIA 2005).

(2) No property loss relief against general income may be given to the person for the loss.]

Textual Amendments

F3 S. 127BA inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 62(3)

[F4 127C Excess loss allocation to partners who are individuals U.K.

(1) Subsection (2) applies if—

(a) in a tax year, an individual (“A”) makes a loss in a UK property business or an overseas property business as a partner in a firm, and

(b) A's loss arises, wholly or partly—

(i) directly or indirectly in consequence of, or

(ii) otherwise in connection with,

relevant tax avoidance arrangements.

(2) No relevant loss relief may be given to A for A's loss.

(3) In subsection (1)(b) “relevant tax avoidance arrangements” means arrangements—

(a) to which A is party, and

(b) the main purpose, or one of the main purposes, of which is to secure that losses of a UK property business or an overseas property business are allocated, or otherwise arise, in whole or in part to A, rather than a person who is not an individual, with a view to A obtaining relevant loss relief.

(4) In subsection (3)(b) references to A include references to A and other individuals.

(5) For the purposes of subsection (3)(b) it does not matter if the person who is not an individual is not a partner in the firm or is unknown or does not exist.

(6) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

• “relevant loss relief” means relief under section 118 (carry-forward property loss relief) or section 120 (property loss relief against general income).]

Textual Amendments

F4 S. 127C inserted (with effect in accordance with Sch. 17 para. 14 of the amending Act) by Finance Act 2014 (c. 26), Sch. 17 para. 9(3)