Income Tax Relief for Trading Losses

The Government has published details of an anti-avoidance measure aimed at schemes generating trading losses, which effectively prevent "sideways" loss relief against other income and gains.

The measure, announced in Revenue & Customs brief 66/09 will apply from 21 October 2009. The examples quoted in the explanatory note include reference to Employee Benefit Trusts, of which use is still being made, despite being subject to its own anti-avoidance legislation and other interpretations (For example, HMRC's announcement on 11 August 2009 regarding EBTs and Inheritance Tax).

Following changes to tax relief on film production in recent years, the opportunity to achieve "sideways" relief through investment activity has now virtually disappeared. The guidance does emphasise that normal commercial arrangements are not affected, but practitioners need to be aware of the increasing complexity of Income Tax loss relief for traders.