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HMRC internal manual

Business Income Manual

Farming losses: restriction of relief after 5 years of losses

S67 Income Tax Act 2007

The five year rule only applies to trading losses arising from farming or market gardening activities. The rule denies trade loss relief against general income etc (see BIM85605) where a loss computed without regard to capital allowances was incurred in each of the five tax years preceding that in which the claimed loss was incurred (see BIM85625).

The rule operates according to an objective test and should be applied, subject to BIM85640 and BIM85645, in all cases where the conditions are satisfied.

While only farming in the UK is deemed to be a trade, the five year rule is not restricted to UK based activities.