Income Tax (Trading and Other Income) Act 2005 section 206

Restriction on bringing losses into account twice

Section 206 prevents a loss that falls within two overlapping basis periods from being used more than once when calculating taxable profits.

• Where basis periods overlap, a loss may fall into both periods due to the way profits are apportioned
• The loss is only recognised in the calculation of profits for the earlier of the two overlapping basis periods
• The loss must not be brought into account again when calculating the profits of the later overlapping basis period
• This rule applies equally to losses that arise directly in two overlapping periods and to those apportioned to overlapping periods under the rules in section 203