BIM85010 | Trade losses: types of relief
From HM Revenue & Customs · Business Income Manual
S-S Income Tax Act 2007 ()
The Taxes Acts provide several different ways in which losses made by those carrying on a trade (including a profession or vocation) may be relieved. These are as follows:
- against the person’s general income of the year the loss was made or of the previous year, see . This relief is not available for losses of 2013-14 to 2023-24 calculated using cash basis, see onwards.
- by reference to the individual’s general income of the three years before the year the loss was made. This only applies where the loss was made in the first four tax years in which the trade was carried on, see onwards. This relief is not available for losses of 2013-14 to 2023-24 calculated using cash basis, see onwards.
- against later profits from the same trade, see .
- against income from a company to which the business which made the losses is transferred, see .
- by reference to profits from the same trade taxed in the four tax years to cessation. Terminal loss relief is only available for the loss made in the final 12 months of trading, see .
S261B Taxation of Chargeable Gains Act 1992 - against the person’s capital gains of the year in which the loss was made or of the previous year, see onwards.
As regards activities which may have been set up with the primary object of creating artificial losses, see .
For activities which are not carried on a commercial basis with a view to the realisation of profit, see onwards.
Set off of losses for the purposes of Class 4 NIC is covered in the National Insurance manual, see .
Where losses include capital allowances, see onwards.
Losses in a trade carried on wholly outside the UK by a UK resident are relievable only against qualifying foreign income (). Refer to Business Profits for advice on .
For losses in Employment (), see