BIM75001 - Trade losses: general matters: introduction

Current year basis of assessment

This page sets out guidance on how the loss relief provisions are to be applied under the ‘current year basis of assessment’.

Years from which the current year basis of assessment rules apply

The 'current year' basis period rules for the assessment of trade profits as set out at BIM71000 onwards apply:

• from 1994/95 to all new businesses set up and commenced on or after 6 April 1994, or
• from 1994/95 for any existing business treated as set up or commenced on or after 6 April 1994 by virtue of old ICTA88/S113 (1), or
• from 1997/98 for all other businesses.

Computation of loss

Subject to any express provision to the contrary, the amount of a trade loss is calculated on the same basis as trade profits (ITTOIA/S26), disallowing expenditure which is capital (ITTOIA/S33), or not wholly and exclusively for the purpose of the trade (ITTOIA/S34), and so on.

When a loss is made

Loss relief may be claimed where a loss has been made. For guidance on when a loss has been made for tax purposes see BIM75050. For guidance on claims see Self Assessment Claims Manual (SACM).

Losses and partnerships

• Guidance on partnerships in general is to be found at BIM72000onwards. In particular BIM72055 explains the rules for sharing losses.
• Further guidance on the allocation of losses to partners and the application of the current year and previous year bases of assessment rules can be found at BIM72200 onwards.
• Guidance on other income and basis periods for partners with specific reference to losses is to be found at BIM72300 onwards.

Trade losses: claims

For general guidance on:

• how claims are to be made BIM75201,
• time limits BIM75210,
• partial claims and priority of claims BIM75215,
• amendments to claims BIM75220,
• late claims BIM75225.

Restrictions on Relief for losses:

For guidance on:

• uncommercial trade losses see BIM75700 onwards,
• contrived trade losses see BIM75740,
• restriction on first year allowances see BIM75750,
• income/losses not eligible for relief see BIM75760.
• non active sole traders see BIM75765 - 75700
• loss relief restrictions for partners see BIM72601 onwards