Part 4

Loss relief
Chapter 2

Trade losses

General restrictions on sideways relief and capital gains relief

Meaning of “non-active capacity” for purposes of section 74A etc
74C
1
For the purposes of
section 74A
an individual carries on a trade in a non-active capacity during a tax year if the individual—
a
carries on the trade at a time during the year, and
b
does not devote a significant amount of time to the trade in the relevant period for the tax year.
2
For the purposes of this section an individual devotes a significant amount of time to a trade in the relevant period for a tax year if, in the relevant period, the individual spends an average of at least 10 hours a week personally engaged in activities of the trade and those activities are carried on—
a
on a commercial basis, and
b
with a view to the realisation of profits as a result of the activities.
3
For this purpose “
the relevant period
” means—
a
where the individual first started to carry on the trade less than six months before the end of the tax year, the period of six months beginning with the date on which the individual first started to carry on the trade;
b
where the individual permanently ceased to carry on the trade less than six months after the start of the tax year, the period of six months ending with the date on which the individual permanently ceased to carry on the trade;
c
in any other case, the tax year.
4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
If—
a
any relief is given on the assumption that the individual devoted or will devote a significant amount of time to the trade in the relevant period for a tax year, but
b
the individual in fact failed or fails to do so,
the relief is withdrawn by the making of an assessment to income tax under this section.
Ss. 74A-74D and cross-heading inserted (21.7.2008 with effect in accordance with Sch. 21 paras. 6, 7 of the amending Act) by Finance Act 2008 (c. 9), Sch. 21 para. 2
S. 74C(4) omitted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2022 (c. 3), Sch. 1 paras. 45(3), 61(1)
Words in s. 74C heading substituted (8.4.2010 with effect in accordance with Sch. 3 para. 11 of the amending Act) by Finance Act 2010 (c. 13), Sch. 3 para. 7(3)
Words in s. 74C(1) substituted (8.4.2010 with effect in accordance with Sch. 3 para. 11 of the amending Act) by Finance Act 2010 (c. 13), Sch. 3 para. 7(2)
Ss. 74ZA-74D applied (10.6.2021) by Finance Act 2021 (c. 26), Sch. 2 para. 3(1)(b)
S. 74C(3) substituted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by Finance Act 2022 (c. 3), Sch. 1 paras. 45(2), 61(1)
Ss. 74B-74D applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 6 para. 1(11)(b)