ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL The conditions for recovery of excess relief
The conditions for excess relief to be recovered under section 74 of FA 2005 are set out in section 74(1). Section 74(1)(a) refers to relief being claimed in respect of a relevant loss under section 380 or 381 of ICTA. Section 74(1)(b) refers to any of that relief being claimed against income other than from the relevant trade.
In a tax year for which there is no income against which to offset a trading loss under section 380 of ICTA, relief may be given under section 72 of FA 1991 by treating the trading losses as capital losses (see Change 160 which makes explicit provision for such cases). In such a case it is arguable the condition in section 74(1)(b) of FA 2005 would not be met.
Such a case is unlikely to arise often in practice, if at all. And section 74 of FA 2005 clearly contemplates recovering relief that has been claimed under section 72 of FA 1991 (see section 74(4) and (5) and section 75 of FA 2005).
Section 792(2) permits relief to be recovered even if the relief in respect of a relevant loss consists wholly of treating the trading loss as a capital loss.