Income Tax Act 2007 section 412D

How carry-forward relief works

Section 412D sets out the step-by-step process for carrying forward and deducting losses from irrecoverable peer-to-peer loans against future years' lending income.

• Losses from irrecoverable peer-to-peer loans that cannot be relieved in the year they arise or sideways against other income can be carried forward against lending income in subsequent years
• The carry-forward follows a strict year-by-year sequence: the outstanding amount is first set against lending income in the first tax year after the relevant year, then the second, third, and fourth years in turn
• The process stops as soon as the full outstanding amount has been deducted, and in any event no further carry-forward is available beyond the fourth tax year after the relevant year
• Each year's deduction is subject to the general income tax limits, meaning a deduction at any step cannot reduce the person's income below nil or create a loss for that year