Income Tax Act 2007 section 75

Trade leasing allowances given to individuals

Section 75 restricts sideways relief for individuals whose trade losses derive from capital allowances on leased or fee-producing assets, unless they meet a time commitment test demonstrating active involvement in the trade.

• Sideways relief is denied for the portion of a trade loss that arises from capital allowances on plant or machinery leased in the course of a trade, or on fee-producing assets generating royalties or licence fees, unless the individual meets the time commitment test.
• A trade leasing allowance is a capital allowance under Part 2 of the Capital Allowances Act 2001 for expenditure on plant or machinery provided for leasing, or on a non-leased asset that produces fees such as royalties or licence fees from rights granted by the individual.
• The time commitment test requires both that the individual carries on the trade for a continuous period of at least six months beginning or ending in the loss-making basis period (Condition A), and that substantially the whole of the individual's time is devoted to carrying on the trade for the same type of period (Condition B).
• Where the individual starts or permanently ceases the trade during the tax year, Condition B is assessed over a continuous six-month period beginning or ending in the loss-making basis period; in all other cases, Condition B must be satisfied throughout the entire loss-making basis period.