Income and Corporation Taxes Act 1988

388 Carry-back of terminal losses. U.K.

(1) M1 Where a trade, profession or vocation is permanently discontinued in the year 1988-89 or any later year, and any person then carrying it on, either alone or in partnership, has sustained therein a loss to which this section applies (“a terminal loss”), that person may, subject to the provisions of this section and of section 389, make a claim requiring that the amount of the terminal loss shall, as far as may be, be deducted from or set off against the amount of [F1 profits] on which he has been charged to income tax under Schedule D in respect of the trade, profession or vocation for [F2 the year of assessment in which the discontinuance occurs and the three years last preceding it]; and there shall be made all such reductions of assessments or repayments of tax as may be necessary to give effect to the claim.

(2) Relief shall not be given in respect of the same matter both under this section and under some other provision of the Income Tax Acts.

(3) M2 Any relief under this section shall be given as far as possible from the assessment for a later rather than an earlier year.

(4) Where—

(a) a claim under this section is made in respect of a terminal loss sustained in a trade, and

(b) relief cannot be given, or cannot be wholly given, against the [F1 profits] of the trade charged to income tax under Schedule D for any year because the amount of those [F1 profits] is insufficient,

any relevant interest or dividends arising in that year shall be treated for the purposes of the application of this section as if they were [F1 profits] on which the person carrying on the trade was assessed under Case I of Schedule D in respect of that trade for that year of assessment, and relief shall be given accordingly by repayment or otherwise.

• For the purposes of this subsection “any relevant interest or dividends” means interest or dividends which would fall to be taken into account as trading receipts in computing the [F1 profits] of the trade for the purpose of assessment under Case I of Schedule D but for the fact that they have been subjected to tax under other provisions of the Income Tax Acts.

(5) The [F1 profits] on which a person or partnership has been charged to income tax for any year of assessment shall be treated for the purposes of any relief under this section from the assessment for that year as reduced by the amount of those [F1 profits] applied in making any payment from which income tax was deducted, but was not accounted for because the payment was made out of profits or gains brought into charge to income tax; and the like reduction shall be made in the amount of the terminal loss for which relief may be given under this section from the assessments for earlier years unless the payment was one which, if not made out of profits or gains brought into charge to income tax—

(a) could have been assessed to income tax under section 350, and

(b) if so assessed, could have been treated as a loss by virtue of section 387.

(6) The question whether a person has sustained any and, if so, what terminal loss in a trade, profession or vocation shall be determined for the purposes of this section by taking the amounts (if any) of the following, in so far as they have not otherwise been taken into account so as to reduce or relieve any charge to tax—

(a) the loss sustained by him in the trade, profession or vocation in the year of assessment in which it is permanently discontinued;

(b) F3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) the loss sustained by him in the trade, profession or vocation in the part of the preceding year of assessment beginning 12 months before the discontinuance; F3 . . .

(d) F3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) F4 . . . For the purposes of paragraphs (a) and (c) of that subsection the amount of a loss shall, subject to the provisions of this section, be computed in the same way as [F1 profits] under the provisions of the Income Tax Acts applicable to Cases I and II of Schedule D.

Textual Amendments

F1 Words in s. 388(1)(4)(5)(7) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3), Sch. 7 para. 1

F2 Words in s. 388(1) substituted (with effect in accordance with s. 218 of the amending Act) by Finance Act 1994 (c. 9), s. 209(6) (with Sch. 20)

F3 S. 388(6)(b)(d) (and word preceding (d)) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(d), Sch. 26 Pt. 5(24), Note 5(a) (with Sch. 20)

F4 Words in s. 388(7) repealed (with effect in accordance with ss. 211(2), 218(1)(b) of the repealing Act) by Finance Act 1994 (c. 9), s. 214(1)(d), Sch. 26 Pt. 5(24), Note 5(a) (with Sch. 20)

Modifications etc. (not altering text)

C1 S. 388 restricted (9.3.1995 with effect in accordance with reg. 1 of the affecting S.I.) by The Lloyd's Underwriters (Tax) Regulations 1995 (S.I. 1995/351), reg. 14(3)

C2 S. 388 modified (1.12.1997 with effect in accordance with reg. 1 of the affecting S.I.) by The Lloyd's Underwriters (Scottish Limited Partnerships) (Tax) Regulations 1997 (S.I. 1997/2681), reg. 10

C3 See 1990(C) ss.30-31(ships)—carry forward does not include postponement under 1990(C) ss.30-31.

Marginal Citations

M1 Source—1970 s.174(1)

M2 Source—1970 s.174(2)-(6)