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-	S986(4) CTA 2009	Withdrawal of deductions if approval for share incentive plan withdrawn: non-trading cases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.