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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Trade losses - restriction of relief: change in conduct of trade

S66 Income Tax Act 2007 (ITA 2007)

S66(5) ITA 2007 provides that where there is a change during the basis period in the way in which a trade is being carried on, it is to be treated as being carried on throughout the basis period in the way it is being carried on by the end of the basis period.

Thus:

  • where a trade, in previous years, was not carried on on a commercial basis with a view to the realisation of profits; and
  • there was a change in the basis period in the way in which the trade is carried on, so that by the end of the basis period, steps have been taken to carry on the trade on a commercial basis.

S66 ITA 2007 does not operate to deny relief for a loss arising in that year.