Finance Act 2009
2009 CHAPTER 10
Introduction
Section 68: Employment Loss Relief
Summary
1.Section 68 will ensure that employment losses will only be relieved where they are not derived from arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax. It will apply to individuals who seek to use section 128 of the Income Tax Act 2007 (ITA) to obtain tax relief using tax avoidance arrangements. It will have no impact on those using the relief who are not attempting to avoid tax. It will have effect from 12 January 2009.
Details of the Section
2.New subsection (5A) provides that no claim is allowed under section 128 of ITA for losses derived from arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax.
3.Subsection (2) provides that the new subsection (5A) has effect from 2009-10 onwards, and also in relation to 2008-09 claims made under section 128 only where a loss is occasioned by an act or omission occurring on or after 12 January 2009.
4.Subsection (3) ensures that where a person has made a claim for relief during the period 12 January 2009 to 1 April 2009 no penalty is payable on the ground that any return, statement or declaration made in connection with the claim contained an inaccuracy if it would not have done so but for the new subsection (5A).
5.Subsection (4) modifies the reference to due date in section 59C of the Taxes Management Act 1970 so that in relation to tax which would not be payable but for the new subsection (5A) the reference in section 59C to the due date becomes the later of 1 April 2009 and the due date. The effect of this is that a person who has made a claim for relief that is precluded by the new subsection (5A) and would otherwise be liable to surcharges under section 59C will not be liable to such surcharges provided they re-order their affairs and pay any additional tax due in accordance with the proposed changes within 28 days starting on the 1 April 2009.
Background Note
6.Section 128 of ITA enables employees to claim relief in respect of a loss made in an employment. Allowable losses may be offset against general income arising in the loss making year, the previous year or both. These provisions counter avoidance involving the abusive use of reliefs available for losses associated with employment. They are introduced in response to arrangements that involve the creation of a loss through deliberate default and are a variant of tax avoidance arrangements using relief for employment-related liabilities, for which counter-measures were announced on 13 January 2009 and publicised on the HM Revenue & Customs website on 12 January 2009.
7.The changes introduced by this measure were announced on 1 April 2009 by a Written Ministerial Statement tabled by the Financial Secretary to the Treasury. A Technical Note explaining who would be affected and how was published on the HM Revenue & Customs website on 1 April 2009. This Note also included further detail about the provisions relating to penalties and surcharges for people who have made a claim between 12 January 2009 and 1 April 2009.
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