Section 71: How relief works
267.This section explains how the loss is to be deducted from income. It is based on section 573(2), (3) and (4A) of ICTA.
268.Section 573(4) of ICTA provides that share loss relief must be claimed before any deduction for “charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of any description”.It has not been rewritten in this Chapter, but instead the order of priority is achieved in CTA 2009 and this Act in the following way.
269.Because share loss relief operates against the company’s income (see subsection (1)), it falls to be deducted at Step 1 in section 4(3), i.e. on the way to finding the amount of the company’s total profits. Charges on income, rewritten as charitable donations relief in Part 6, and expenses of management are to be deducted from the company’s total profits at Step 2 in section 4(2). See section 189(1) of this Act and section 1219(1) of CTA 2009 (as amended by Schedule 1 to this Act). For another example of a deduction from total profits, seesection 37(3) (relief for trade losses against total profits).
270.This section provides that the amount not deducted from income of the accounting period in which the loss is incurred may be deducted from the income of earlier accounting periods ending within the immediately preceding period of 12 months (see Step 2 in subsection (1)). The extent to which a deduction may be made at Step 2 from an accounting period which falls only partly within that period of 12 months is limited in accordance with section 72.
271.Subsection (6) is new. It has been included to make explicit that the balance of any allowable loss for which share loss relief is not obtained continues to be capable of being claimed as a deduction under TCGA.
