Trusts and income tax losses

Are trusts subject to the £50,000 cap on sideways loss relief?

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Under s24A ITA 2007, from 6 April 2013 a general reliefs cap restricts the amount of sideways relief that can be claimed against income for any given tax year to the greater of £50,000 or 25% of adjusted total income.

In this instance, a Trust which operates a trade has incurred a loss of £65,000.  Does the £50,000 cap apply to trusts as it does to individuals?  Unfortunately, much of the wording in texts I have looked at is inconsistent and does not clearly state if the cap also applies to trusts or not.

Looking at the HMRC Business Income Manual and sections dealing with trade losses and the restriction of relief, there are conflicting definitions as to who the cap applies to:

For example, BIM85015 Trade losses - types of relief: relief against general income refers to "A person (individual, partner or trustee) who makes a loss in a tax year may claim relief for that year from income tax............".

BIM85703 Trade losses - restriction of relief: interaction with the income tax reliefs cap refers to ".... a general reliefs cap was introduced to restrict the amount of certain reliefs that an individual can claim....".

BIM85761 Restriction of relief: no sideways relief for tax-generated losses "S74ZA is an anti-avoidance measure which denies sideways loss relief for tax-generated losses made by a person(sole trader, partner, trustee)....."

Can anybody provide a definitive answer, and if so, point me in the direction of some supporting evidence?



Replies (3)

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By Wanderer
13th Jan 2023 09:59
24ALimit on Step 2 deductions
(1)If the taxpayer is an individual, there is a limit on certain deductions which may be made for the tax year at Step 2.

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By Wanderer
13th Jan 2023 10:01

I don't see the conflicts that you seem to see?

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Replying to Wanderer:
By montrose1
13th Jan 2023 10:05

Apologies, I perhaps didn't word my query well enough. My problem essentially is does the £50,000 cap also apply to trustees i.e. should the £65,000 trading loss incurred by the trust be restricted to £50,000 before claiming sideways loss relief?

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