Income Tax Act 2007 section 805

Partners claiming relief for licence-related trading losses

Section 805 targets non-active partners who claim sideways or capital gains relief for trading losses linked to licence expenditure and who later receive non-taxable proceeds when the licence is disposed of, by treating those proceeds as taxable income.

• A non-active partner who claims sideways or capital gains relief for a trading loss derived from licence-related expenditure may be caught by this anti-avoidance rule if the licence is later disposed of for non-taxable consideration.
• A "chargeable event" arises either when the licence is disposed of (if relief has already been claimed) or when relief is claimed (if the licence has already been disposed of), and multiple chargeable events can occur in the same tax year.
• When a chargeable event occurs, the individual is treated as receiving an amount of income for that tax year, and this deemed income is treated as arising outside the trade — so it cannot itself generate further trading loss relief.
• The charge applies regardless of whether the trade is still being carried on, whether some of the disposal consideration is taxable, or whether the licence disposal forms part of a larger transaction.