Section 42: Ring fence trades: further extension of period for relief
178.This section extends the period of relief for ring fence trades in certain circumstances. It is based on section 393B of ICTA.
179.For the section to apply a claim must have been made under section 39 (terminal losses: extension of periods for which relief may be given) or section 40 (ring fence trades: extension of periods for which relief may be given). The normal relief period is therefore already extended from twelve months to three years.
180.If there are insufficient profits in the three year relief period this section allows the unrelieved loss to be carried back to earlier periods.
181.The intention is to provide relief for losses arising as a consequence of incurring expenditure on decommissioning costs.
182.If decommissioning expenditure is incurred and a loss arises after the ring fence trade has ceased then no claim to relief would at first sight appear to be possible. A claim under section 39 would fail as the loss did not arise in an accounting period that commenced in the final twelve months of a company’s trade. A claim under section 40 would fail as the loss did not arise in a ring fence trade (that trade having ceased). But that analysis of section 39 overlooks section 165 of CAA. This treats post-cessation decommissioning expenditure as having been incurred in the chargeable period in which the trader ceased to carry on the trade. As a result a claim under section 39 (terminal losses: extension of periods for which relief may be given) is possible.
