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Property losses carried forward

Can losses from a solely owned property be amalgamated with a property jointly owned with spouse?

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Taxpayer has £12k of losses carried forward from one and a half properties. He moved back into his solely owned flat for an entire tax year, whilst renovating his main residence, then let it again. He continued letting another property with his spouse (which made a small loss for 16/17). Can all the losses be carried continue forward against future profits?

The HMRC manual says:

ITA09/S117 and S118 refer to a deduction from the profits of ‘the business’ for subsequent tax years. Therefore losses arising in one property business cannot be carried forward against profits of another rental business which the customer has in a different capacity. For example, if a customer has let property of his own and is a member of a partnership which has rental income, losses of his personal rental business cannot be set against his share of the partnership’s rental income.

Is this a 'different capacity'?

 

 

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Portia profile image
By Portia Nina Levin
22nd Jan 2018 10:16

It depends... on whether (or not) the husband and wife "joint letting" actually amounts to a parsnip.

It probably doesn't, and so it probably isn't [a different capacity], but who knows?

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By timothyvogel
22nd Jan 2018 10:44

Isn't probably a wonderful word?
Over the years I have seen this type of scenario twice, once mother and son, once brothers. The first time HMRC said it was the same business and he was fine, the second it was not.
I argued that it was a family property that the family had decided should be accounted for in one persons name. His ownership derived from his position in the family in both cases, but |HMRC on one case would not accept it, but did on the other

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By Portia Nina Levin
22nd Jan 2018 10:50

It doesn't matter whether (or not) it is the same business. It only matters whether or not it is the same person acting in the same capacity, because then the law deems it to all be the same business. HMRC's manuals even say so.

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By RG
22nd Jan 2018 15:46

Thanks, can you point me to where "HMRC's manuals even say so."

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By Portia Nina Levin
22nd Jan 2018 16:01

Wait. What? You were the one that quoted from it in the OP!

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By RG
22nd Jan 2018 16:05

OK thanks, I see your point!

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By Portia Nina Levin
22nd Jan 2018 16:18

The relevant law though is in ITTOIA, ss 263-264, s 361, and s 859(2)-(3).

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