Income Tax Act 2007 section 71

Treating trade losses as CGT losses

Section 71 provides a signpost to capital gains tax relief that may be available when a trade loss cannot be fully absorbed against general income.

• Where a trade loss claim against general income cannot use the full amount of the loss, the unused portion may be converted into an allowable capital gains tax loss
• This relief applies in tax years where there is insufficient general income to absorb the entire trade loss
• The detailed rules for this treatment are found in sections 261B and 261C of the Taxation of Chargeable Gains Act 1992
• Section 261C defines the maximum amount that can be treated as a CGT loss under section 261B