Annual exempt amount 1998-99 onwards: losses of other years and attributed gains
TCGA92/S3 (5A) - (5C)
The losses to be taken into account in the computation of the taxable amount, see CG18033, may include unused losses from earlier years, and in the case of an individual now deceased, losses accruing in the year of death, see CG30430. This paragraph explains how to calculate the amount to be taken into account at Steps 3 and 4 in CG18033 in such cases, where there are also ‘attributed gains’ from which personal losses may not be deducted. The amount of such attributed gains is referred to in the legislation as ‘the Section 2(5)(b) amount’. The reason for the somewhat complicated rules is that these gains are tapered before being attributed to the settlor or beneficiary and deducting personal losses would involve setting untapered losses against tapered gains. But this does not affect the annual exempt amount which, in effect, will go against ‘the Section 2(5)(b) amount’ first.
Any annual exempt amount left over after setting it against ‘the Section 2(5)(b) amount’ can be used against other gains. Losses of the year are set against the other gains even if this reduces the net gains to below the amount of left over annual exempt amount, while losses of other years are set against the other gains only to the extent necessary to reduce those gains to the amount of left over annual exempt amount.
Under Section 3(5C) you have to calculate the ‘adjusted net gains’. This is the figure produced by taking the Step 1 figure from CG18033, adding those attributed gains from which personal losses may be deducted and deducting from that total just the losses of the year. To this figure is then added the lesser of the annual exempt amount and ‘the Section 2(5)(b) amount’.
- If the adjusted net gains are less than the annual exempt amount, you do not take into account any losses brought forward or carried back.
- If the adjusted net gains are greater than the annual exempt amount, then the losses of other years to be taken into account are the losses available up to the excess of the ‘adjusted net gains’ over the annual exempt amount. There is an example at CG18204.