ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice. Change 12: Carry back of terminal losses: sections 89 and 90
This change makes it clear, in cases where a person makes a claim for terminal trade loss relief, that relief is to be used with other reliefs in a way that minimises the claimant’s income tax liability.
The change also codifies current practice as regards the calculation of terminal loss relief under section 388(6) of ICTA.
Under section 388(1) of ICTA, a terminal loss is to be deducted from or set off against the profits charged to income tax for the year of assessment. It is not entirely clear what “charged” means in this context. For instance, whether it means income before or after the deduction of other reliefs. This change removes the concept of “charged” profits completely. So deductions for terminal trade loss relief will be made from profits in accordance with the rules set out in section 25, that is in the manner that minimises the claimant’s income tax liability.
The change also makes it clear that: