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Mindful of the challenging economic outlook, SARAH TURGOOSE and MIKE DOWN take a look at the rules and restrictions for sideways set off of trading losses
Key points
- Is a trade being carried on?
- The five year test was aimed at losses incurred by hobby farmers.
- A serious trader must be able to explain a series of losses.
- Active involvement will help show the business is commercial.
- Remember that losses can be carried forward.
It is a fact of business life that traders make losses as well as profits. And where losses arise tax relief and potential tax refunds follow. Then it is down to HMRC to police the tax system to make sure that a trading loss claimed against general income through 'sideways' set off is properly allowable.
While HMRC have been fairly active in this area for many years we detect an increase in the number of income tax enquiries challenging the commerciality of loss making...
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