BIM75005 - Trade losses: general matters: forms of relief

The Taxes Acts provide several different ways in which losses made by those carrying on a trade, profession or vocation may be relieved. These are as follows:

a) ITA07/S64 - against the person’s general income of the year the loss was made or of the previous year, see BIM75410.

b) ITA07/S72 - 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, profession or vocation was carried on, see BIM75450 onwards;

c) TCGA92/S261B - against the person’s capital gains of the year in which the loss was made or of the previous year, see BIM75420 onwards;

d) ITA07/S83 - against later profits from the same trade, profession or vocation, see BIM75500;

e) ITA07/S86 - against income from a company to which the business which made the losses is transferred, see BIM75500;

f) ITA07/S89 - by reference to profits from the same trade, profession or vocation 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 BIM75480 onwards.

• As regards activities which may have been set up with the primary object of creating artificial losses, see BIM75740.
• For activities which are not carried on a commercial basis with a view to the realisation of profit, see BIM75700 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 BIM75730 onwards.
• Losses in trade, profession or vocation carried on wholly outside UK by a UK resident are relievable only against qualifying foreign income ITA07/S95. Refer to CAR Residency for advice on S95.
• Loss in Employment ITA07/S128, see BIM75240