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HMRC internal manual

Capital Allowances Manual

General: claims: sideways set-off of excess capital allowances - UK property business

ITA07/S120 (1) (Formerly ICTA88/S379A (3))

In general losses arising on a UK property business cannot, for Income Tax, be set off sideways against other income. However, the part of such a loss which is made up of capital allowances can be set off sideways against other income for:

  • the year in which the loss arose, and
  • the year after the year in which the loss arose.

 

You calculate the part of the loss on a UK property business made up of capital allowances and available for sideways set-off like this. First, you deduct any balancing charges from the capital allowances. This gives you the net capital allowances. You compare this figure with the ‘property’ loss. If the net capital allowances are less than the property loss, the net capital allowances are the part of the loss available for sideways set-off. If the net capital allowances are more than the ’property’ loss the whole of the loss is available for sideways set-off.