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HMRC internal manual

Capital Allowances Manual

PMA: FYA: First-year tax credits: losses incurred in carrying on a qualifying activity

CAA01/Sch.A1 para 1, paras 4 - 9

In order to claim a first-year tax credit a company must have incurred a loss in carrying on a qualifying activity (CAA2001/s15). The legislation clarifies the meaning of “loss”, for qualifying activities other than trades, for tax credit purposes as follows (for corporation tax purposes commercial furnished holiday lettings are treated as a trade):

UK property businesses, other than furnished holiday letting businesses:

For companies other than insurance companies a loss is one to which CTA2009/SS62 & 63 apply.

For insurance companies a loss is one that is treated as a result of FA12/S87(3) as a deemed BLAGAB management expense for an accounting period for the purpose of FA12/S76.

Overseas property businesses:

For companies other than insurance companies a loss is one to which CTA2009/S62 & 63 apply.

For insurance companies a loss is one that may be treated as a result of FA12/S87(3) as a deemed BLAGAB management expense for an accounting period for the purpose of FA12/S76.

Basic life assurance and general annuity businesses where the profits are charged to tax under the I minus E basis:

The loss is the excess of expenses (over income and gains) available to be carried forward under FA12/S73.

Managing the investments of a company with investment business:

The loss is the excess of amounts mentioned in CTA09/S1223(2) over income

The legislation ensures that only losses from a business carried on a commercial basis may be surrendered for a first-year tax credit.