High-risk areas of the tax code: Relief for income tax losses - CIOT comments
The CIOT comments, sent to HMRC on 30 September 2011, regarding their consultation which covers reliefs for losses incurred in a trade, profession or vocation, a property business or in employment that are relievable against general income or capital gains either of the same tax year or another tax year.
The Government’s stated aim is to explore ways of ensuring that genuine business losses and employment losses are relieved while deterring taxpayers from entering into tax avoidance arrangements intended to exploit these loss reliefs.
The document puts forward 3 possible approaches that HMRC think could achieve their policy aim:
- Principle-based legislation;
- Mechanistic rules; and
- Administration of the claims.
The document also poses the following questions:
- Question 1: HMRC would welcome comments on ways to deter the making of invalid claims to 'sideways loss relief'.
- Question 2: HMRC would welcome comments on ways to deter the making of invalid claims to property loss relief against general income.
- Question 3: HMRC would welcome information on the types of employment and office holder losses that arise and how the relief could be better targeted to these.
- Question 4: Would restricting loss relief to the amount of the economic loss irrevocably suffered be effective in deterring tax avoidance and provide sufficient certainty? How could it be expressed clearly? Are there alternative principle-based options which should be considered?
- Question 5: What would be the advantages and disadvantages of applying a £25,000 cap for a tax year on total losses that can be relieved against general income or capital gains as 'sideways loss relief', property loss relief against general income, post-cessation trade relief, post-cessation property relief and employment loss relief? Are there alternative mechanistic options which should be considered?
- Question 6: What would be the advantages and disadvantages of a check first, repay later approach being applied where total losses claimed in a tax year as 'sideways loss relief', property loss relief against general income, post-cessation trade relief, post-cessation property relief and employment loss relief exceed £25,000? Are there alternative operational options which should be considered?
- Question 7: HMRC would welcome comments or evidence to support the assessment of the impacts of the changes under consultation.
30 September 2011