Taxation of Chargeable Gains Act 1992 section 261B

Treating trade loss etc. as CGT loss

Section 261B allows individuals to convert unused trade or employment losses into allowable capital losses for capital gains tax purposes, subject to certain limits and conditions.

• Where a trade or employment loss claimed against general income exceeds the individual's net income for the year, the unused portion can be treated as an allowable capital gains tax loss for that same year.
• The amount converted to a capital loss is capped at the individual's net chargeable gains for the year (before deducting the annual exempt amount), so it cannot create or increase a capital loss position beyond actual gains.
• Once a trade loss has been converted into an allowable capital loss, it is no longer available for income tax relief, and any converted loss carried forward is cancelled for years of assessment beginning after the individual permanently ceases the trade, profession, vocation, employment or office in which the loss arose.
• The claim must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the loss was made.