BIM75215 - Trade losses - claims for relief: Part claims and priority of claims

In deciding whether a loss relief claim is validly made, it is necessary to understand how different claims interact. A number of general points arise:

1. Any claim must be for the full amount of the loss made and not already utilised. Partial claims are not permitted (Butt v Haxby [1982] 56TC547). This means that a loss set against income for a particular year must be set as far as possible against that income even if this means wasting personal allowances. If the loss exceeds total income against which the relief is to be given, any balance may be the subject of a different claim.
2. Each pound of loss is relieved once and once only. A loss relieved under ITA07/S64 or ITA07/S72 is not relievable by aggregation in a subsequent year (ITTOIA/S206). And an amount of loss relieved by aggregation or by a loss relief claim may not be claimed under any other loss relief provision (ITA07/S63).
3. Relief under ITA07/S83, ITA07/S86 or ITA07/S89 is given solely against trading profits. Relief under ITA07/S64 or ITA07/S72 is, by contrast, given against total income of which trading profits form a part. As a consequence, the former reliefs are in strictness to be given in priority to the latter ones. However, the result will be different where the Section 64/72 relief has effectively become final before the Section 83, 86 or 89 relief is given. In these circumstances, there are no provisions which allow the Section 64/72 relief to be withdrawn, and this relief must therefore take priority over any other relief for the same year which is given later. Where an individual makes claims under both Sections 64/72and 89, you should in practice allow whichever claim the trader chooses to become effectively final first. This enables traders to choose the priority of these reliefs in these limited circumstances.
4. Relief may be claimed both under ITA07/S64(2)(a) for a current year loss and under ITA07/S64(2)(b) for a loss of the following year “against” the same year's income. In such a case, the loss of the earlier year must be relieved in preference to the loss of the later year (ITA07/S65(3)). (See BIM75410 for an example of how the priority rule works.)
5. Where, in addition to a claim to relief under ITA07/S64, a claim is made for the same year for relief under ITA07/S131 (see VCM45000 onwards), the Section 131 relief is to be allowed in priority to the relief under ITA07/S64 (ITA07/S133(4)).
6. No other statutory provision specifically sets out any order of priority of allowance of different reliefs claimed in respect of the same loss. In the absence of any such priority, the taxpayer should be invited to specify in which order claims are to be finalised.