Income Tax Act 2007

25 Reliefs and allowances deductible at Steps 2 and 3: supplementary

(1) This section supplements the provisions about reliefs and allowances in Steps 2 and 3 of the calculation in section 23.

(2) At Steps 2 and 3, deduct the reliefs and allowances in the way which will result in the greatest reduction in the taxpayer’s liability to income tax.

(3) Subsection (2) is subject to—

• section 65(2) to (4) (priority rule in relation to trade loss relief against general income),

• section 80(2) (ring fence income),

• section 83(3) and (4) (carry-forward trade loss relief against trade profits),

• section 89(3) (terminal trade loss relief against trade profits),

• section 93(2) (terminal trade loss relief and mineral extraction trade),

• section 95(2) (foreign trades etc reliefs only against qualifying foreign income),

• section 115(2) (restrictions on reliefs for firms exploiting films),

• section 118(3) and (4) (carry-forward property loss relief against property business profits),

• section 121(2) and (3) (priority rule in relation to property loss relief against general income),

• section 129(2) to (4) (priority rule in relation to employment loss relief against general income),

• section 133(4) (share loss relief against general income),

• section 152(4) and (7) (loss relief against miscellaneous income),

• sections 574(3) to (8) and 575 (manufactured dividends on UK shares: restrictions on deductions),

• section 579(2) to (5) and 580 (manufactured interest on UK securities: restrictions on deductions),

• section 258 of CAA 2001 (special leasing of plant or machinery),

• section 355 of that Act (buildings for miners etc: carry-back of balancing allowances),

• section 479 of that Act (persons having qualifying non-trade expenditure),

• section 601 of ITTOIA 2005 (how relief for patent expenses is given), and

• any other provision of the Income Tax Acts under which reliefs or allowances deductible at Step 2 or 3 are not permitted to be deducted from particular components of income or are required to be deducted from particular components of income or in a different order.

(4) A relief or allowance may be deducted at Step 2 or 3 only so far as there is sufficient income from which to deduct it.

(5) In deciding whether there is sufficient income from which to deduct a relief or allowance, reliefs and allowances already deducted at Step 2 or 3 must be taken into account.

(6) Nothing in Step 2 or 3 is to be read as permitting a relief or allowance to be deducted more than once.