Current Year Loss Relief (s.64) Flashcards
What can a s.64 loss relief claim be set against?
Under s.64 losses may be set against net income of the tax year of loss and/or the preceding tax year.
Describe the s.64 computation? (i.e. how do you arrive at the taxable income amount)
Income
Less: Deductible payments
Net income
Less: s.64 losses
Revised Net Income
Less: PAs
Taxable income
When must a s.64 claim be submitted?
s.64 claim must be submitted to HMRC by the first anniversary of 31 January following the end of the tax year of the loss.
For example, if a loss arose in the tax year 2021/22, the claim must be submitted by 31 January 2024.
IN THAT ORDER
1. Tax year loss arose 2021/22
2. First anniversary tax year loss arose 2022/23
3. 31 January 2024
What is the s.64 claim restriction?
How is it calculated?
What doesn’t it apply to?
The restriction applies to the amount of loss which can be relieved against non-trading income.
Certain loss relief claims are limited to the greater of:
- £50,000; and
- 25% of the individuals adjusted total income
There is no restriction on the amount of the loss which can be offset against income from the same trade.
Why was the restriction introduced? re: s64
To ensure that individuals on higher incomes cannot use reliefs excessively.
What is the effect on tax payments re: s.64 claim? x2
- A s.64 claim used in the current year reduces the net income thus reducing the amount of tax due.
- A s.64 that is carried back to a previous year, changes that years tax liability and creates a refund.
What is an individuals adjusted total income?
Generally their total income less the gross amount of any personal pension contributions.
What do you need to remember when considering the s.64 restriction?
The restriction on the amount that can be set against non-trading income needs to be calculated for each CY and CB separately.
So if you’re doing a current year claim you calculate the restriction for that period and if you’re doing a carry back claim you calculate the restriction again for that period.
What does the trade have to be for loss relief to be available? re: continuous trade
No loss relief is available unless the trade is commercial.
What is defined as commercial? re: trade x3
The trade is commercial if it is:
- carried on throughout the basis period for the tax year;
- on a commercial basis; and
- with a view to the realisation of profits.
What are the 3 conditions of the s.64 claim?
i. CY & CB are independent i.e it’s either or both claims in any order
ii. a s.64 claim is not mandatory
iii. No partial claims are permitted, it’s all or nothing
