IT rental business losses can be set against general income only to the extent that they are attributable to:
- certain capital allowances,
- certain agricultural expenses (see PIM4224).
Until the 2010-11 tax year, relief against general income could be claimed to the extent the loss was due to furnished holiday lettings. This is not available for tax years 2011-12 onwards, see PIM4130. Losses of a furnished holiday lettings business may now only be carried forward to use against future profits of that same furnished holiday lettings business.
Where a customer claims loss relief against general income, they must take the full amount of the loss available up to the amount of their general income. They can’t opt to take a smaller amount, either they claim for the full loss or they claim for none (ITA07/S121).
PIM4220 – Property Income Manual – HMRC internal manual – GOV.UK (www.gov.uk)
The largest capital allowances are likely to be from Annual Investment Allowance claims.
Any taxpayer seeking to obtain in excess of £50,000 of otherwise unlimited income tax reliefs in any one year will find their deductions ‘capped’ (ITA 2007, s 24A). The ‘cap’ is the greater of:
- 25% of their total income; or