Trading Loss relief is now limited to the higher of £50,000 or 25% of the losses made. This restriction was designed to stop clever tax avoidance schemes but can be very significant for rural businesses.
This year, a client made a capital gain of £100,000 on the sale of a barn. In the same year they built a slurry lagoon and were able to get 100% tax relief resulting in trading loss of over £100,000. In the past we could have set the trading loss against the capital gain and so there would have been no tax. However under the new rules there will be a tax cost of up to £14,000.
There are usually ways to minimise tax liabilities in these circumstance but they must be planned early. If you would like advice on minimising your tax liabilities, then please contact us.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.