Income Tax Act 2007 section 127B

No relief for tax-generated agricultural expenses

Section 127B prevents property loss relief against general income where the agricultural expenses giving rise to the loss are connected with tax avoidance arrangements.

• Where a property business with a relevant agricultural connection generates a loss, and any allowable agricultural expenses deducted in calculating that loss arise from tax avoidance arrangements, relief against general income is denied for the portion of the loss attributable to those expenses.
• The applicable amount of the loss is treated as attributable to the tax-avoidance-connected expenses first, before anything else, maximising the denial of relief.
• "Relevant tax avoidance arrangements" are any arrangements the person is party to where a main purpose is obtaining a reduction in tax liability through property loss relief against general income; "arrangements" is defined very broadly to include any agreement, understanding, scheme, transaction, or series of transactions, whether legally enforceable or not.
• The section applies to losses in either UK or overseas property businesses, whether carried on alone or in partnership.