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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Class 4 NICs: computation of liability: losses


SSCBA92/SCH2/PARA3 provides that a trading loss is to be relieved for NICs purposes in the same manner as for Income Tax under ITA2007/S64, S72, S83, S89, and S93.

No relief is available for a loss arising under:

  • ITA2007/S574
  • ITA2007/S387 from an assessment under ITA88/S349 on an annual payment not made out of profits or gains (SSCBA92/SCH2/PARA3 (2)(c)), or
  • ITA2007/S390 from the carrying forward or backward of interest paid which was not allowed in arriving at the trading profit or loss (SSCBA92/SCH2/PARA3 (2)(d)).

As claims for Losses under Class 4 NICs are made in the same way as for Income Tax, the guidance in the Business Income Manual applies to Class 4 NICs as well as Income Tax.

Guidance on loss claims can be found at BIM85005 onwards. Guidance on particular aspects can be found at:

BIM85065 Claims for loss relief
BIM82055 Partnership losses
BIM85075 Time limits for loss relief claims
SACM10030 Late claims for loss relief
BIM85015 Loss relief under ITA88/S64 (Set off against general income)
BIM85045 Loss relief under ITA88/S72 (Loss in early year of trading)
BIM85055 Loss relief under ITA88/S89 (Relief for a terminal loss)
BIM85060 Loss relief under ITA88/S83 (Carry forward against same trade)

An Income Tax loss can be set against income that is not liable for Class 4 NICs. For example, an income tax loss can be set off under ITA2007/S64 against employment income liable to Class 1 NICs. To the extent that the loss has been used against income which is not liable to Class 4 NICs, relief has not been given for Class 4 NICs purposes. That part of the loss is independent of the Income Tax loss and can be carried forward against Class 4 NICs profits of the same trade. As a result, the Income Tax trading losses carried forward may be different from the NICs losses carried forward.

Relief for an employment income loss may occasionally be given for Income Tax in an assessment on trading profits. In this situation, there is no Class 4 NICs loss that can be set against the Class 4 NICs profits.