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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Miscellaneous income: losses

S152-S155, S1016 Income Tax Act 2007; S91, S1173 Corporation Tax Act 2010 (CTA 2010); Sch18 Para55 Finance Act 1988

Relief is available for a loss on a transaction, where, had a profit arisen, the income would have been chargeable under the miscellaneous income sweep-up charge or any of the provisions in the table below. (There are restrictions on the inclusion of certain provisions in the table.)

Income Tax provision Corporation Tax provision Description
     
Pt2 Ch18 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) Pt3 Ch15 Corporation Tax Act 2009 (CTA 2009) Post-cessation receipts: trades, professions and vocations
Pt3 Ch8 ITTOIA 2005 Pt4 Ch7 CTA 2009 Rent receivable in connection with certain UK concerns
Pt3 Ch9 ITTOIA 2005 Pt4 Ch8 CTA 2009 Rent receivable for UK electric-line wayleaves
Pt3 Ch10 ITTOIA 2005 Pt4 Ch9 CTA 2009 Post-cessation receipts: UK property businesses
Pt4 Ch2 ITTOIA 2005 Interest
Pt4 Ch9 ITTOIA 2005 Gains from contracts for life insurance etc
Pt4 Ch11 ITTOIA 2005 Transactions in deposits
Pt4 Ch12 ITTOIA 2005 Disposals of futures and options involving guaranteed returns
S579 ITTOIA 2005 Royalties and other income from intellectual property
S583 ITTOIA 2005 S908 CTA 2009 Income from disposals of know-how
S587 ITTOIA 2005 S912 CTA 2009 Income from sales of patent rights
Pt5 Ch3 ITTOIA 2005 Films and sound recordings: non-trade businesses
Pt5 Ch4 ITTOIA 2005 Certain telecommunication rights: non-trading income
Pt5 Ch5 ITTOIA 2005 Settlements: amounts treated as income of settlor
S682(4) ITTOIA 2005 S965(4) CTA 2009 Adjustments after the administration period
S844(4) ITTOIA 2005 S1277(4) CTA 2009 Withdrawal of relief for unremittable foreign income after source ceases
Pt12 Ch2 ITA 2007 Accrued income profits
S681BB(8), (9) ITA 2007 New lease after assignment or surrender
S681DD ITA 2007 S874(1) CTA 2010 Leased assets: capital sums
S720, S727 or S731 ITA 2007 Transfer of assets abroad
Pt13 Ch3 ITA 2007 S818(1) CTA 2010 Transactions in land
S776 ITA 2007 Sales of occupation income
S796 ITA 2007 Individuals benefited by film relief
S804 ITA 2007 Losses derived from exploiting licence: individuals in partnership
S809CZC(2) ITA 2007 Income transferred under a loan or credit transaction
S752 CTA 2009 Non-trading gains on intangible fixed assets
S986(4) CTA 2009 Withdrawal of deductions if approval for share incentive plan withdrawn: non-trading cases
S1083(5) CTA 2009 Refunds of expenditure on research and development
S1229 CTA 2009 Management expenses: claw back of relief
S1252 CTA 2009 Industrial development grants: companies with investment business
S1253 CTA 2009 Contributions to local enterprise organisations or urban regeneration companies: disqualifying benefits
S1254 CTA 2009 Repayments under Financial Services and Markets Act 2000
S538(3) CTA2010 Real estate investment trusts: entry charge
S636(1) CTA 2010 Banks etc in compulsory liquidation
S779(2) CTA 2010 Loan or credit transactions
S851(8) CTA 2010 Sale and lease-back: taxation of consideration
S56(2) Income and Corporation Taxes Act 1988 (ICTA 1988) Transactions in deposits
S571(1) ICTA 1988 S571(1) ICTA 1988 Cancellation of certificates: schemes for rationalising industry
S774(1) ICTA 1988 S774(1) ICTA 1988 Transactions between dealing company and associated company
S68(2) Finance Act 1989 (FA 1989) Employee share ownership trust (chargeable event)
S71(4) FA 1989 Employee share ownership trust (borrowing)
S256(2) Capital Allowances Act 2001 (CAA 2001) Life assurance business: capital allowances
S258(4) CAA 2001 Special leasing
S479(4) CAA 2001 Persons having qualifying non-trade expenditure
S394(2) Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) Charge on administrator of non-approved pension scheme
S476(5) ITEPA 2003 Charge on occurrence of chargeable event
Reg17 Offshore Funds (Tax) Regulations 2009, SI 2009 No 3001 Offshore income gains
S1086(2) CTA 2010 S1086(2) CTA 2010 Chargeable payments connected with exempt distributions
S254(2) Taxation (International and Other Provisions) Act 2010 Tax arbitrage: calculation or recalculation of income etc following receipt notice

Note that there must have been a possibility of profit. For example, post-cessation expenses are not such a loss even though receipts would be chargeable under the post cessation provisions (see BIM90000 onwards). This is because simply paying an expense is not a transaction which can yield a profit.

Income against which relief is given

For Income Tax a loss may be set against income charged under the sweep-up provision or any of the provisions listed in the table above for the same tax year. Any remaining surplus may be carried forward and set against income so charged for later tax years (taking the earliest year first, and so on).

For Corporation Tax a loss may be set against income charged under the sweep-up provision or any of the provisions listed in the table above for the same accounting period. Any remaining surplus may be carried forward and set against income so charged for later accounting periods (taking the earliest such period first, and so on).

Proviso

Losses cannot be set against amounts charged which arise from computational adjustments, e.g. recoveries of reliefs which have been over-allowed. The losses must also arise from transactions, and not, for example, from the fall in value of life policy contracts. Nor, for the purposes of Income Tax, can they be set against amounts which do not form part of the taxpayer’s total income.

Claims

For Income Tax, a claim that a loss has arisen on a transaction, where a profit on that transaction would have been chargeable, must be made within four years of the end of the tax year of loss. A separate claim to set the loss against particular income for a tax year may be the subject of a separate claim to be made within four years of the end of the tax year in which relief is to be given.

For Corporation Tax, a claim that a loss has arisen on a transaction, where a profit on that transaction would have been chargeable, must be made within four years from the end of the accounting period to which it relates.

Where the officer is not prepared to admit the existence of a loss alleged to have been incurred, the case should be referred to CTISA (Technical).