NIM24610 - Class 4 NICs: computation of liability: losses
Paragraph 3 of Schedule 2 SSCBA 1992
Paragraph 3 of Schedule 2 SSCBA 1992 provides that a trading
loss is to be relieved for NICs purposes in the same manner as for
Income Tax under sections 380, 381, 385, 388 and 389 ICTA 1988.
No relief is available for a loss arising under:
- section 574 ICTA 1988,
- section 387 ICTA 1988 from an assessment under section 349 ICTA 1988 on an annual payment not made out of profits ( Paragraph 3(2)(c) of Schedule 2 SSCBA 1992), or
- section 390 ICTA 1988 from the carrying forward or backward of interest paid which was not allowed in arriving at the trading profit or loss (Paragraph 3(2)(d) of Schedule 2 SSCBA 1992).
As claims for losses under Class 4 NICs are made in the same way
as for Income Tax, the guidance in the Business Income Manual
applies to Class 4 NICs as well as Income Tax.
Guidance on loss claims can be found at BIM75200 onwards.
Guidance on particular aspects can be found at:
| BIM75201 | How to make a claim for loss relief |
| BIM72055 | Partnership losses |
| BIM75210 | Time limits for loss relief claims |
| BIM75225 | Late claims for loss relief |
| BIM75410 | Loss relief under section 380 ICTA 1988 (Set off against general income) |
| BIM75450 | Loss relief under section 381 ICTA 1988 (Loss in early year of trading) |
| BIM75480 | Loss relief under section 388 ICTA 1988 (Relief for a terminal loss) |
| BIM75500 | Loss relief under section 385 ICTA 1988 (Carry forward against same trade) |
The Class 4 NICs loss is independent of the Income Tax loss. An
Income Tax loss can be set against income that is not liable for
Class 4 NICs, for example, an income tax loss can be set off under
section 380 ICTA 1988 against employment income liable for Class 1
NICs. In this case the Class 4 NICs loss has not been used and can
be carried forward against Class 4 NICs profits of the same trade.
As a result Income Tax trading losses carried forward may be
different from NICs losses carried forward.
Relief for an employment income loss may occasionally be
given for Income Tax in an assessment on trading profits. In this
situation there is no Class 4 NICs loss that can be set against the
Class 4 NICs profits.
Similarly, a furnished holiday lettings loss may be set off
against trading profits under section 380 ICTA 1988, but such a
loss will not be allowable for Class 4 NICs purposes since it does
not arise from a trade whose profits would be charged to Class 4
NICs, (see PIM4130).
