BIM100190 - Miscellaneous income: losses
S152-S155, S1016 Income Tax Act 2007; S91, S1173 Corporation Tax Act 2010 (CTA 2010); Sch18 Para55 Finance Act 1998; S22 Finance Act 2015
Relief is available for a loss on a transaction, where, had a profit arisen, the income would have been chargeable under the provisions in the table below. (There are restrictions on the inclusion of certain provisions in the table.)
| Income Tax provision | Corporation Tax provision | Description |
|---|---|---|
| Pt2 Ch18 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) | Pt3 Ch15 Corporation Tax Act 2009 (CTA 2009) | Post-cessation receipts: trades, professions and vocations |
| Pt3 Ch8 ITTOIA 2005 | Pt4 Ch7 CTA 2009 | Rent receivable in connection with certain UK concerns |
| Pt3 Ch9 ITTOIA 2005 | Pt4 Ch8 CTA 2009 | Rent receivable for UK electric-line wayleaves |
| Pt3 Ch10 ITTOIA 2005 | Pt4 Ch9 CTA 2009 | Post-cessation receipts: UK property businesses |
| Pt4 Ch2 ITTOIA 2005 | - | Interest |
| Pt4 Ch9 ITTOIA 2005 | - | Gains from contracts for life insurance etc |
| Pt4 Ch11 ITTOIA 2005 | - | Transactions in deposits |
| Pt4 Ch12 ITTOIA 2005 | - | Disposals of futures and options involving guaranteed returns |
| S579 ITTOIA 2005 | - | Royalties and other income from intellectual property |
| S583 ITTOIA 2005 | S908 CTA 2009 | Income from disposals of know-how |
| S587 ITTOIA 2005 | S912 CTA 2009 | Income from sales of patent rights |
| Pt5 Ch3 ITTOIA 2005 | - | Films and sound recordings: non-trade businesses |
| Pt5 Ch4 ITTOIA 2005 | - | Certain telecommunication rights: non-trading income |
| Pt5 Ch5 ITTOIA 2005 | - | Settlements: amounts treated as income of settlor |
| S682(4) ITTOIA 2005 | S965(4) CTA 2009 | Adjustments after the administration period |
| S844(4) ITTOIA 2005 | S1277(4) CTA 2009 | Withdrawal of relief for unremittable foreign income after source ceases |
| Pt12 Ch2 ITA 2007 | - | Accrued income profits |
| S681BB(8), (9) ITA 2007 | - | New lease after assignment or surrender |
| S681DD ITA 2007 | S874(1) CTA 2010 | Leased assets: capital sums |
| S720, S727 or S731 ITA 2007 | - | Transfer of assets abroad |
| Pt13 Ch3 ITA 2007 | S818(1) CTA 2010 | Transactions in land |
| S776 ITA 2007 | - | Sales of occupation income |
| S796 ITA 2007 | - | Individuals benefited by film relief |
| S804 ITA 2007 | - | Losses derived from exploiting licence: individuals in partnership |
| S809CZC(2) ITA 2007 | - | Income transferred under a loan or credit transaction |
| - | S752 CTA 2009 | Non-trading gains on intangible fixed assets |
| - | S986(4) CTA 2009 | Withdrawal of deductions if approval for share incentive plan withdrawn: non-trading cases |
| - | S1083(5) CTA 2009 | Refunds of expenditure on research and development |
| - | S1229 CTA 2009 | Management expenses: claw back of relief |
| - | S1252 CTA 2009 | Industrial development grants: companies with investment business |
| - | S1253 CTA 2009 | Contributions to local enterprise organisations or urban regeneration companies: disqualifying benefits |
| - | S1254 CTA 2009 | Repayments under Financial Services and Markets Act 2000 |
| - | S538(3) CTA2010 | Real estate investment trusts: entry charge |
| - | S636(1) CTA 2010 | Banks etc in compulsory liquidation |
| - | S779(2) CTA 2010 | Loan or credit transactions |
| - | S851(8) CTA 2010 | Sale and lease-back: taxation of consideration |
| - | S56(2) Income and Corporation Taxes Act 1988 (ICTA 1988) | Transactions in deposits |
| S571(1) ICTA 1988 | S571(1) ICTA 1988 | Cancellation of certificates: schemes for rationalising industry |
| S774(1) ICTA 1988 | S774(1) ICTA 1988 | Transactions between dealing company and associated company |
| S68(2) Finance Act 1989 (FA 1989) | - | Employee share ownership trust (chargeable event) |
| S71(4) FA 1989 | - | Employee share ownership trust (borrowing) |
| - | S256(2) Capital Allowances Act 2001 (CAA 2001) | Life assurance business: capital allowances |
| S258(4) CAA 2001 | - | Special leasing |
| S479(4) CAA 2001 | - | Persons having qualifying non-trade expenditure |
| S394(2) Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) | - | Charge on administrator of non-approved pension scheme |
| S476(5) ITEPA 2003 | - | Charge on occurrence of chargeable event |
| Reg17 Offshore Funds (Tax) Regulations 2009, SI 2009 No 3001 | - | Offshore income gains |
| S1086(2) CTA 2010 | S1086(2) CTA 2010 | Chargeable payments connected with exempt distributions |
| - | S254(2) Taxation (International and Other Provisions) Act 2010 | Tax arbitrage: calculation or recalculation of income etc following receipt notice |
Note that there must have been a possibility of profit. For example, post-cessation expenses are not such a loss even though receipts would be chargeable under the post cessation provisions (see BIM90000 onwards). This is because simply paying an expense is not a transaction which can yield a profit.
Income against which relief is given
Income Tax
Prior to the 2015-16 tax year an Income Tax loss could be set against income charged under the sweep-up provision or any of the provisions listed in the table above for the same tax year. Any remaining surplus was then carried forward and set against income so charged for later tax years (taking the earliest year first, and so on).
Finance Act 2015 introduced new rules which meant that for the 2015-16 tax year and onwards a loss can only be set against income chargeable under the same provision listed in the table above.
Corporation tax
For Corporation Tax a loss may be set against income charged under the sweep-up provision or any of the provisions listed in the table above for the same accounting period. Any remaining surplus may be carried forward and set against income so charged for later accounting periods (taking the earliest such period first, and so on).
Proviso
Losses cannot be set against amounts charged which arise from computational adjustments, e.g. recoveries of reliefs which have been over-allowed. The losses must also arise from transactions, and not, for example, from the fall in value of life policy contracts. Nor, for the purposes of Income Tax, can they be set against amounts which do not form part of the taxpayer’s total income.
Claims
For Income Tax, a claim that a loss has arisen on a transaction, where a profit on that transaction would have been chargeable, must be made within four years of the end of the tax year of loss. A separate claim to set the loss against particular income for a tax year may be the subject of a separate claim to be made within four years of the end of the tax year in which relief is to be given.
For Corporation Tax, a claim that a loss has arisen on a transaction, where a profit on that transaction would have been chargeable, must be made within four years from the end of the accounting period to which it relates.
Where the officer is not prepared to admit the existence of a loss alleged to have been incurred, the case should be referred to Business Profits.