BIM85010 - Trade losses: types of relief
S60-S100 Income Tax Act 2007 (ITA 2007)
The Taxes Acts provide several different ways in which losses made by those carrying on a trade (including a profession or vocation) may be relieved. These are as follows:
- S64 ITA 2007 - against the person’s general income of the year the loss was made or of the previous year, see BIM85015. This relief is not available for losses of 2013-14 and subsequent years calculated using cash basis, see BIM70000 onwards.
- S72 ITA 2007 - by reference to the individual’s general income of the three years before the year the loss was made. This only applies where the loss was made in the first four tax years in which the trade was carried on, see BIM85045 onwards. This relief is not available for losses of 2013-14 and subsequent years calculated using cash basis, see BIM70000 onwards.
- S83 ITA 2007 - against later profits from the same trade, see BIM85060.
- S86 ITA 2007 - against income from a company to which the business which made the losses is transferred, seeBIM85060.
- S89 ITA 2007 - by reference to profits from the same trade taxed in the four tax years to cessation. Terminal loss relief is only available for the loss made in the final 12 months of trading, see BIM85055.
- S261B Taxation of Chargeable Gains Act 1992 - against the person’s capital gains of the year in which the loss was made or of the previous year, see BIM85025 onwards.
- As regards activities which may have been set up with the primary object of creating artificial losses, see BIM85740.
- For activities which are not carried on a commercial basis with a view to the realisation of profit, see BIM85700 onwards.
- Set off of losses for the purposes of Class 4 NIC is covered in the National Insurance manual.
- Where losses include capital allowances, see BIM85730 onwards.
- Losses in a trade carried on wholly outside the UK by a UK resident are relievable only against qualifying foreign income (S95 ITA 2007). Refer to Business Profits for advice on Section 95.
- For losses in Employment (S128 ITA0207), see BIM85090