£50k cap on sideways trade loss relief

Trusts Discussion
1

Are trust trade losses subject to the £50k cap under section 24A ITA 2007?

I am trying to confirm if a trade loss greater than £50,000 incurred by a trust and set against general income (Section 64 ITA 2007) of the trust is subject to the loss relief cap of £50k in s24 ITA2007.

TSEM 3615 TSEM3615 - Trust income and gains: trustees - general reliefs - HMRC internal manual - GOV.UK (www.gov.uk) refers to trustees being entitled to claim general reliefs in ITA 2007 Part 4 that are for “persons” but not “individuals”. The cap restriction at s24 ITA 2007 however refers to the limit applying only if the taxpayer is an “individual”. Does it apply to the trust trade losses?

Martin

2

The obvious difference in wording is hard to rationalise away. A trustee or trustees are persons but they are not in that capacity individuals. The draftsperson is making that distinction by limiting reliefs at step 2 of s23 which applies to “persons” and if not applicable to trustees such an interpretation would make the reference at step 4 nonsense. Sections 24 and 24A apply in terms only to an individual. Literal interpretation seems entirely appropriate and I see no obvious reason why a purposive/contextual interpretation should displace it to regard a trustee as an “individual”. If it was desired to extend the cap to trustees the statute should have said so.

Jack Harper

3

Difficult to see on any reading how the “cap” can apply to restrict trust trade loss offsets.

Malcolm Finney

4

Thank you for your comments, that is what I thought but was trying to rationalise why the distinction was being made that trustees were not subject to the £50k cap.

5

It is always possible that the relative position of trustees was overlooked. But trading trusts are not all that common and HMG/HMRC may feel that the Exchequer does not need the same protection from artificial trading losses e.g. film schemes as trustees may either not have power to participate or, even if they do, may nonetheless be exposed to breach of trust. Trading trust losses are probably therefore considered likely to be genuine.

Jack Harper