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HMRC internal manual

Business Income Manual

Example: Election for full relief not to apply (loss making trade)

Joe has employment income from his full time job, but on weekends also provides dog walking service to the residents of a nearby apartment block earning £15 per week. Joe wants to expand his dog walking trade so decides to spend more money on advertising to generate business. Joe incurs expenses for advertising flyers (£100),  online advertising (£650) and on dog treats (£200).


Joe’s relevant trade is that of being a dog walker. Joe has no other trades or miscellaneous income.


Joe’s relevant income for the year is £780 (calculated as £15 x 52 weeks). Joe’s expenses total £950 (treats £200 + advertising flyers £100 + online advertising £650) which means that Joe’s trade is loss making as his expenses exceed his income.


As Joe’s gross income is no more than the £1,000 allowance, Joe qualifies for full relief and the profits or losses of his trade are treated as nil.


Joe can decide whether he would like to

-           make an election for full relief not to apply and to complete a self-assessment return to take advantage of his losses of £170 (£780 gross income less £950 allowable expenses), or

-           to accept full relief and not have to complete a self-assessment return.

In this case Joe decides he wants to make an election for full relief not to apply and so he needs to complete a self assessment tax return.