The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
Relief for trading losses may be subject to a number of anti-avoidance measures. One of these is the cap on unlimited tax reliefs, which applies to losses incurred through a sole trader business or partnership. This is a measure that needs to be considered when conducting tax planning work for unincorporated businesses that involves utilising losses.
The cap on unlimited income tax reliefs restricts relief for trading losses and property losses, where these are used against general income.
This is done by limiting the effect of certain reliefs, including loss reliefs, which are given against general income at Step 2 of the income tax calculation.
The cap only applies where the taxpayer claims more than £50,000 in reliefs in any one year. It acts to limit the relief to the greater of:
Example 1 and Example 2 illustrate how the limit of the relief is calculated.
The person’s individual relief cap for that year is calculated and compared with the total amount of relief for that year that falls within the cap. If the total reliefs are within the amount of the cap, full relief is available in that year. If the total reliefs exceed the amount of the cap, the excess reliefs will be carried forward or lost.
Therefore, in order to apply these provisions, it is necessary to determine:
See Example 3.
The following specific reliefs are initially included in the cap (see below for exceptions to this list):
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