Finance Act 2010

Section 24

SCHEDULE 3 Sideways relief etc

Amendments of Chapter 2 of Part 4 of ITA 2007

1 Chapter 2 of Part 4 of ITA 2007 (trade losses) is amended as follows.

2 In section 60(1)(c) (overview of Chapter), for “(see sections 75” substitute “and capital gains relief (see sections 74ZA”.

3 In section 64(8) (deduction of losses from general income)—

(a) in paragraph (ba), for “74A” substitute “74ZA”,

(b) at the end of paragraph (c), insert “and”, and

(c) omit paragraph (e).

4 In section 72(5) (relief for individuals for losses in first 4 years of trade)—

(a) in paragraph (ba), for “74A” substitute “74ZA”,

(b) at the end of paragraph (c), insert “and”, and

(c) omit paragraph (e).

5 Before section 74A insert—

“74ZA No relief for tax-generated losses

(1) This section applies if—

(a) during a tax year a person carries on (alone or in partnership) a trade, profession or vocation (“the relevant activity”),

(b) the person makes a loss in the relevant activity in that tax year, and

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

(2) No sideways relief or capital gains relief may be given to the person for the loss (but subject to subsection (5)).

(3) 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 sideways relief or capital gains relief.

(4) In subsection (3) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(5) This section has no effect in relation to any loss that derives wholly from qualifying film expenditure (see section 74D).

(6) For the purposes of this section—

(a) capital gains relief is, in relation to a loss, the treatment of a loss as an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and

(b) capital gains relief is given for a loss when it is so treated.”

6 Omit section 74B (no relief for tax-generated losses in case of non-active individuals carrying on trade).

7 (1) Section 74C (meaning of “non-active capacity” for purposes of sections 74A and 74B etc) is amended as follows.

(2) In subsection (1), for “sections 74A and 74B” substitute “section 74A”.

(3) In the heading, for “sections 74A and 74B” substitute “section 74A”.

8 (1) Section 74D (meaning of “qualifying film expenditure” for purposes of sections 74A and 74B) is amended as follows.

(2) In subsections (1) and (4), for “74A and 74B” substitute “74ZA and 74A”.

(3) In the heading, for “74A and 74B” substitute “74ZA and 74A”.

9 Omit section 81 (dealings in commodity futures).

Other amendments

10 In FA 2009, in Schedule 6, in paragraph 1(11)—

(a) in paragraph (b), for “74B” substitute “74ZA”,

(b) at the end of paragraph (c), insert “and”, and

(c) omit paragraph (e) (and the “and” before it).

Commencement

11 (1) The amendments made by this Schedule have effect in relation to a loss if it arises directly or indirectly in consequence of, or otherwise in connection with—

(a) arrangements which are entered into on or after 21 October 2009, or

(b) any transaction forming part of arrangements which is entered into on or after that date.

(2) But those amendments do not have effect where the arrangements are, or any such transaction is, entered into pursuant to an unconditional obligation in a contract made before that date.

(3) “An unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of a right (whether or not under the contract).