Losses: setting losses against general income
IT rental business losses can be set against general income only to the extent that they are attributable to:
- certain capital allowances,
- certain agricultural expenses (see PIM4224).
Until the 2010-11 tax year, relief against general income could be claimed to the extent the loss was due to furnished holiday lettings. This is not available for tax years 2011-12 onwards, see PIM4130. Losses of a furnished holiday lettings business may now only be carried forward to use against future losses of that same furnished holiday lettings business.
Where a customer claims loss relief against general income, they must take the full amount of the loss available up to the amount of their general income. They can’t opt to take a smaller amount - either they claim for the full loss or they claim for none (ITA07/S121).
Years of set-off
The years against which a property loss may be set off are not the same as for a trade loss. Trade losses may be set against the income of the same year or the year before. Under ITA07/S120 however, the claim for property loss relief is against the income of the same year or the following year. There is no requirement to set the loss against the earlier available year first. Property losses cannot be carried back to the year before.
Claims for loss relief
A claim has to be made on or before the first anniversary of 31 January following the end of the year of assessment (s124(1) ITA07). For example, where relief is to be claimed for the 2017/18 tax year, the normal filing date would be 31 January 2019 and the claim for property loss relief must be made by 31 January 2020.
Where possible any claim should be included in a tax return, or an amendment to the tax return.
If the claim is made for the tax year following the year in which the loss arose, and the loss had previously been carried forward for that year, the claim to loss relief must include an amendment to the return in which the loss was carried forward to reduce the amount of the loss carried forward by the amount of the loss to be claimed (s124(4) ITA07).
If the full amount of the applicable loss cannot be relieved for a given year, a separate claim is needed to relieve the remaining amount in another year in which relief is available for the loss.