Relief for current year trading losses: planning considerations

Produced by Tolley
Relief for current year trading losses: planning considerations

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Relief for current year trading losses: planning considerations
  • Budget 2021 ― extension of temporary measures
  • Things to consider when relieving losses
  • Cap on unlimited income tax reliefs
  • Accelerate the relief

In summary, for continuing trades, current year trading losses may be relieved against the following:

  1. total income of the year of loss or the preceding year, or

  2. current year or preceding year capital gains, to the extent that losses cannot be relieved against current or prior year total income, or

  3. future profits arising from the same trade

ITA 2007, ss 83, 64; TCGA 1992, s 261B

This is discussed in detail in the Sole trader losses ― established trades guidance note. Relief for trading losses in opening and closing years is discussed in the Sole trader loss relief ― opening years and Sole trader losses on cessation guidance notes.

This guidance note focuses on the planning aspects that need to be considered to ensure the best outcome for the taxpayer.

Budget 2021 ― extension of temporary measures

The period over which a business may carry back trading losses has been extended from one year to three years in response to the difficulties caused by the coronavirus (COVID-19) pandemic. This measure will be legislated in Finance Bill 2021. Full details can be found in the Sole trader losses ― established trades guidance note.

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