Income Tax Act 2007

Trade loss relief against general income U.K.

64 Deduction of losses from general income U.K.

(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),

[F1 (ba) sections [F2 74ZA] to 74D (general restrictions on relief),]

[F3 (bb) section 74E (restriction on the relief and early trade losses relief where cash basis applies),]

(c) sections 75 to 79 (restrictions on the relief and early trade losses relief in relation to capital allowances), [F4 and]

(d) section 80 (restrictions on those reliefs in relation to ring fence income),

F5 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 S. 64(8)(ba) inserted (21.7.2008 with effect in accordance with Sch. 21 paras. 6, 7 of the amending Act) by Finance Act 2008 (c. 9), Sch. 21 para. 4

F2 Word in s. 64(8)(ba) substituted (8.4.2010 with effect in accordance with Sch. 3 para. 11 of the amending Act) by Finance Act 2010 (c. 13), Sch. 3 para. 3(a)

F3 S. 64(8)(bb) inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 54(2)

F4 Word in s. 64(8)(c) inserted (8.4.2010 with effect in accordance with Sch. 3 para. 11 of the amending Act) by Finance Act 2010 (c. 13), Sch. 3 para. 3(b)

F5 S. 64(8)(e) omitted (8.4.2010 with effect in accordance with Sch. 3 para. 11 of the amending Act) by virtue of Finance Act 2010 (c. 13), Sch. 3 para. 3(c)

F6 S. 64(8)(f) and word omitted (21.7.2008 with effect in accordance with s. 66(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 66(4)(l)(i)

65 How relief works U.K.

(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 [F7 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.

Textual Amendments

F7 Words in s. 65(1) substituted (with effect in accordance with Sch. 3 para. 3 of the amending Act) by Finance Act 2013 (c. 29), Sch. 3 para. 2(3)(a)