BIM75630 - Farming losses: loss considered is loss incurred in year to 5 April
In determining for the purpose of the five year test whether a loss was incurred in any particular year of assessment, the period to be taken is the year to 5 April. Where accounts are made up to a date other than 5 April, it may therefore be necessary to apportion the results of different accounting periods.
Example
Marjorie Brown trading as a farmer of long standing makes up her accounts annually to 31 December. Her results were as follows:-
|
|
Case I profit or loss before capital allowances |
|
Year ended 31.12.01 |
Loss £3700 |
|
Year ended 31.12.02 |
Loss £1100 |
|
Year ended 31.12.03 |
Loss £4800 |
|
Year ended 31.12.04 |
Loss £7000 |
|
Year ended 31.12.05 |
Loss £2600 |
|
Year ended 31.12.06 |
Profit £1200 |
|
Year ended 31.12.07 |
Loss £4400 |
|
Year ended 31.12.08 |
Loss £5300 |
Marjorie claims loss relief under ITA2007/S64(2)(a) for 2007-08. At first sight it may appear that Section 67 does not apply as she made a profit in the year ended 31 December 2006. A different picture emerges however when profits or losses are computed by reference to years of assessment -
|
2002-03 |
(270/365 x L £1100 = L £814) + (95/365 x L £4800 = L £1249) |
= Loss £2063 |
|
2003-04 |
(270/365 x L £4800 = L £3551) + (96/366 x L £7000 = L £1836) |
= Loss £5387 |
|
2004-05 |
(270/365 x L £7000 = L £5164) + (95/365 x L £2600 = L £677) |
= Loss £5841 |
|
2005-06 |
(270/365 x L £2600 = L £1923) + (95/365 x P £1200 = P £312) |
= Loss £1611 |
|
2006-07 |
(270/365 x P £1200 = P £888) + (95/365 x L £4400 = L £1145) |
= Loss £257 |
|
2007-08 |
(270/365 x L £4400 = L £3255) + (96/366 x L £5300 = L £1390) |
= Loss £4645 |
We can now see that she made a trading loss, computed without regard to capital allowances, in each of the five preceding years of assessment. Section 67 therefore applies and the loss incurred in 2007-08 of £4400 is not available for relief under Section 64.
