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63 | Prohibition against double counting |
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If relief is given under any provision of this Chapter for a loss or part of a loss, |
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relief is not to be given for— |
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(b) | the same part of the loss, |
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under any other provision of this Chapter or of the Income Tax Acts. |
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Trade loss relief against general income |
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64 | Deduction of losses from general income |
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(1) | A person may make a claim for trade loss relief against general income if the |
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(a) | carries on a trade in a tax year, and |
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(b) | makes a loss in the trade in the tax year (“the loss-making year”). |
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(2) | The claim is for the loss to be deducted in calculating the person’s net income— |
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(a) | for the loss-making year, |
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(b) | for the previous tax year, or |
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| (See Step 2 of the calculation in section 23.) |
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(3) | If the claim is made in relation to both tax years, the claim must specify the tax |
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year for which a deduction is to be made first. |
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(4) | Otherwise the claim must specify either the loss-making year or the previous |
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(5) | The claim must be made on or before the first anniversary of the normal self- |
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assessment filing date for the loss-making year. |
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(6) | Nothing in this section prevents a person who makes a claim specifying a |
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particular tax year in respect of a loss from making a further claim specifying |
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the other tax year in respect of the unused part of the loss. |
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(7) | This section applies to professions and vocations as it applies to trades. |
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(8) | This section needs to be read with— |
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(a) | section 65 (how relief works), |
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(b) | sections 66 to 70 (restrictions on the relief), |
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(c) | sections 75 to 79 (restrictions on the relief and early trade losses relief in |
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relation to capital allowances), |
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(d) | section 80 (restrictions on those reliefs in relation to ring fence income), |
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(e) | section 81 (restrictions on those reliefs in relation to dealings in |
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(f) | section 734 of ICTA (restrictions on those reliefs in relation to bond- |
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(1) | This subsection explains how the deductions are to be made. |
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| The amount of the loss to be deducted at any step is limited in accordance with |
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| Deduct the loss in calculating the person’s net income for the specified tax year. |
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| This step applies only if the claim is made in relation to both tax years. |
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| Deduct the part of the loss not deducted at Step 1 in calculating the person’s |
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net income for the other tax year. |
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| If the loss has not been deducted in full at Steps 1 and 2, the person may use the |
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part not so deducted in giving effect to any other relief under this Chapter |
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(depending on the terms of the relief). |
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(2) | There is a priority rule if a person— |
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(a) | makes a claim for trade loss relief against general income (“the first |
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claim”) in relation to the loss-making year, and |
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(b) | makes a separate claim in respect of a loss made in the following tax |
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year in relation to the same tax year as the first claim. |
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(3) | The rule is that priority is given to making deductions under the first claim. |
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(4) | For this purpose a “separate claim” means— |
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(a) | a claim for trade loss relief against general income, or |
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(b) | a claim for employment loss relief against general income under section |
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Restriction on relief for uncommercial trades |
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66 | Restriction on relief unless trade is commercial |
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(1) | Trade loss relief against general income for a loss made in a trade in a tax year |
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is not available unless the trade is commercial. |
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(2) | The trade is commercial if it is carried on throughout the basis period for the tax year— |
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(a) | on a commercial basis, and |
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(b) | with a view to the realisation of profits of the trade. |
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(3) | If at any time a trade is carried on so as to afford a reasonable expectation of |
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profit, it is treated as carried on at that time with a view to the realisation of |
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(4) | If the trade forms part of a larger undertaking, references to profits of the trade |
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are to be read as references to profits of the undertaking as a whole. |
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(5) | If there is a change in the basis period in the way in which the trade is carried on, the |
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trade is treated as carried on throughout the basis period in the way in which it is |
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carried on by the end of the basis period. |
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(6) | The restriction imposed by this section does not apply to a loss made in the |
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exercise of functions conferred by or under an Act. |
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(7) | This section applies to professions and vocations as it applies to trades. |
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Restriction on relief for "hobby" farming or market gardening |
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67 | Restriction on relief in case of farming or market gardening |
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(1) | This section applies if a loss is made in a trade of farming or market gardening |
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in a tax year (“the current tax year”). |
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(2) | Trade loss relief against general income is not available for the loss if a loss, |
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calculated without regard to capital allowances, was made in the trade in each |
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of the previous 5 tax years (see section 70). |
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(3) | This section does not prevent relief for the loss from being given if— |
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(a) | the carrying on of the trade forms part of, and is ancillary to, a larger |
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(b) | the farming or market gardening activities meet the reasonable |
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expectation of profit test (see section 68), or |
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(c) | the trade was started, or treated as started, at any time within the 5 tax |
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years before the current tax year (see section 69 below, as well as section |
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68 | Reasonable expectation of profit |
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(1) | This section explains how the farming or market gardening activities (“the |
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activities”) meet the reasonable expectation of profit test for the purposes of |
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(2) | The test is decided by reference to the expectations of a competent farmer or |
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market gardener (a “competent person”) carrying on the activities. |
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(a) | a competent person carrying on the activities in the current tax year |
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would reasonably expect future profits (see subsection (4)), but |
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(b) | a competent person carrying on the activities at the beginning of the |
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prior period of loss (see subsection (5)) could not reasonably have |
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expected the activities to become profitable until after the end of the |
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(4) | In determining whether a competent person carrying on the activities in the |
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current tax year would reasonably expect future profits regard must be had |
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(a) | the nature of the whole of the activities, and |
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(b) | the way in which the whole of the activities were carried on in the |
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(5) | “The prior period of loss” means— |
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(a) | the 5 tax years before the current tax year, or |
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(b) | if losses in the trade, calculated without regard to capital allowances, |
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were also made in successive tax years before those 5 tax years (see |
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section 70), the period comprising both the successive tax years and the |
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69 | Whether trade is the same trade |
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(1) | This section applies for the purposes of sections 67 and 68. |
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(2) | If there is a change in the persons carrying on a trade which involves all of the |
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persons carrying it on before the change permanently ceasing to carry it on— |
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(a) | the trade is treated as permanently ceasing to be carried on, and |
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(b) | a new trade is treated as starting to be carried on, |
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| at the date of the change (but see subsections (3) to (6)). |
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(3) | A husband and wife are treated as the same person. |
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(4) | Persons who are civil partners of each other are treated as the same person. |
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(5) | A husband or wife is treated as the same person as— |
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(a) | a company of which either one of them has control, or |
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(b) | a company of which both have control. |
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(6) | A person’s civil partner is treated as the same person as— |
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(a) | a company of which either of the civil partners has control, or |
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(b) | a company of which both have control. |
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(7) | “Control” has the same meaning as in Part 11 of ICTA (see section 416 of that |
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70 | Determining losses in previous tax years |
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(1) | This section applies for the purposes of sections 67(2) and 68(5) in determining |
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whether a loss, calculated without regard to capital allowances, is made in the |
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trade in any tax year before the current tax year. |
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(2) | The loss made in a tax year before the current tax year is not taken to be the loss |
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(if any) made in the basis period for the tax year, but is instead the loss made |
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(3) | This loss is determined by reference to— |
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(a) | the profits or losses of periods of account of the trade (calculated for |
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income tax purposes, but without regard to capital allowances), or |
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(b) | if (as a result of section 69) a person claiming the relief is treated as the |
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same person as a company within the charge to corporation tax, the |
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profits or losses of the company’s accounting periods (calculated for |
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corporation tax purposes, but without regard to capital allowances), |
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(a) | a period of account does not coincide with a tax year, or |
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(b) | an accounting period does not coincide with a tax year, |
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| any of the steps in section 203(2) of ITTOIA 2005 may be taken to arrive at the |
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profits or losses made in a tax year. |
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| For this purpose references in section 203(2) of that Act to basis periods are |
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read as references to tax years and references to periods of account are read as |
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including accounting periods. |
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(5) | The steps must be taken in accordance with section 203(3) or (4) of ITTOIA |
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(6) | A loss in a trade is calculated without regard to capital allowances by |
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(a) | the allowances treated as expenses of the trade under CAA 2001, and |
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(b) | the charges treated as receipts of the trade under that Act. |
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