Income Tax Act 2007

121 How relief works U.K.

(1) This subsection explains how the deductions are to be made.

The amount of the applicable amount of the loss to be deducted at any step is limited in accordance with section 25(4) and (5).

Step 1

Deduct the applicable amount of the loss in calculating the person's net income for the specified tax year.

Step 2

This step applies if the applicable amount of the loss has not been deducted in full and the person makes a separate claim for the other tax year.

Deduct the part of the applicable amount of the loss not deducted at Step 1 in calculating the person's net income for the other tax year.

Other relief

If the applicable amount of the loss has not been deducted in full at Steps 1 and 2, relief is given under section 118 for the part not so deducted.

(2) There is a priority rule if—

(a) a person makes a claim for property loss relief against general income (“the prior claim”) in respect of a loss made in a tax year,

(b) the prior claim specifies the next tax year as the one for which the deduction is to be made (“the relevant tax year”),

(c) the person makes another claim for property loss relief against general income in respect of a loss made in the relevant tax year, and

(d) that other claim also specifies the relevant tax year as the one for which the deduction is to be made.

(3) The rule is that priority is given to making deductions under the prior claim.