Finance Act 2014

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Amendment of Chapter 1 of Part 12 of Principal Act (loss relief)

11. (1) Chapter 1 of Part 12 of the Principal Act is amended—

(a) in section 381(1) by substituting “this section and sections 381A, 381B and 381C” for “this section and section 381A”,

(b) by inserting the following section after section 381A:

“Restriction of loss relief — passive trades

381B. (1) (a) In this section ‘relevant loss’ means a loss in a trade or profession (including any amount in respect of allowances which, pursuant to section 392, is to be treated as a loss for the purposes of section 381) but does not include a loss which arises from—

(i) farming, within the meaning of Part 23,

(ii) market gardening,

(iii) a trade which consists of the underwriting business of a member of Lloyd’s,

(iv) any amount in respect of qualifying expenditure which by virtue of section 482(2) is to be treated as a loss, or

(v) any amount in respect of specified capital allowances, within the meaning of section 531AAE, which pursuant to section 392 is to be treated as a loss.

(b) For the purposes of this section—

(i) an individual carries on a trade in a non-active capacity during a period if the individual does not work for the greater part of his or her time on the day to day management or conduct of the trade or profession during that period, and

(ii) an individual does not work for the greater part of his or her time on the day to day management or conduct of the trade or profession during a period unless, over the course of that period, he or she spends an average of at least 10 hours a week personally engaged in the activities of the trade or profession and those activities are carried on on a commercial basis and in such a way that profits of the trade or profession could reasonably be expected to be made in that period or within a reasonable time afterwards.

(2) (a) Subject to paragraphs (b) and (c), where a person carries on a trade or profession in a non-active capacity during a year of assessment then for the purposes of section 381, the amount of any relevant loss sustained by that person in that trade or profession in that year of assessment shall be the actual amount of the loss so sustained, or €31,750, whichever is the lower.

(b) Where the basis period for a year of assessment is shorter than 12 months, then the reference to €31,750 in paragraph (a) shall be construed as €31,750 reduced in the proportion that the length of the basis period bears to 12 months.

(c) Where a person carries on 2 or more trades or professions to which this subsection applies, then for the purposes of section 381, the aggregate of the amount of the losses sustained by that person in those trades or professions in any year of assessment shall be the aggregate of the actual amount of the losses so sustained, or €31,750, whichever is the lower.”,

and

(c) by inserting the following section after section 381B (inserted by paragraph (b)):

“Restriction of loss relief — anti-avoidance

381C. (1) (a) In this section—

‘arrangements’ includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

‘relevant loss’ means a loss in a trade or profession (including any amount in respect of allowances which, pursuant to section 392, is to be treated as a loss for the purposes of section 381) but does not include a loss which arises from—

(i) any amount in respect of qualifying expenditure which by virtue of section 482(2) is to be treated as a loss, or

(ii) any amount in respect of specified capital allowances, within the meaning of section 531AAE, which by virtue of section 392 is to be treated as a loss;

‘relevant period for a year of assessment’ means the basis period for the year of assessment, or where that basis period is shorter than 6 months—

(i) where the basis period is determined in accordance with section 67(1)(a), a period of 6 months ending on the last day of that basis period, or

(ii) in all other cases, a period of 6 months starting on the first day of the basis period;

‘relevant tax avoidance arrangements’ means arrangements the main purpose, or one of the main purposes of which, is to give rise to a claim under section 381.

(b) For the purposes of this section—

(i) an individual carries on a trade in a non-active capacity during the relevant period for a year of assessment if the individual does not work for the greater part of his or her time on the day to day management or conduct of the trade or profession during that period, and

(ii) an individual does not work for the greater part of his or her time on the day to day management or conduct of the trade or profession during the relevant period for a year of assessment unless, over the course of that period, he or she spends an average of at least 10 hours a week personally engaged in the activities of the trade or profession and those activities are carried on on a commercial basis and in such a way that profits of the trade or profession could reasonably be expected to be made in that relevant period for a year of assessment or within a reasonable time afterwards.

(2) Where a person carries on a trade or profession in a non-active capacity in the relevant period for a year of assessment and sustains a relevant loss in that trade or profession for that year of assessment and that loss arises in whole or in part, directly or indirectly, in consequence of or otherwise in connection with relevant tax avoidance arrangements, then for the purposes of section 381 that person shall be deemed not to have sustained a loss in that trade or profession for that year of assessment.”.

(2) Paragraphs (a) and (c) of subsection (1) shall apply as respects a basis period for a year of assessment which commences after 23 October 2014.

(3) Paragraph (b) of subsection (1) shall apply as respects the year of assessment 2015 and subsequent years of assessment.