Income Tax Act 2007 section 74C

Meaning of "non-active capacity" for purposes of section 74A etc.

Section 74C defines what it means for an individual to carry on a trade in a "non-active capacity" for the purposes of the cap on trade loss reliefs under sections 74A and 74B, and sets out the time commitment test and consequences of failing to meet it.

• An individual carries on a trade in a non-active capacity during a tax year if they are involved in the trade at some point during the year but do not devote a significant amount of time to it in the relevant period
• A significant amount of time means personally spending an average of at least 10 hours per week on activities of the trade, carried on commercially and with a view to profit
• The relevant period is normally the basis period for the tax year, but where the basis period is shorter than six months it is extended to a six-month window starting from when the trade began or ending when it permanently ceased
• If relief is granted on the assumption that the individual met the time commitment test but they in fact failed to do so, the relief is withdrawn by way of an income tax assessment