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39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 2

Income tax: loss relief— treatment of capital allowances

Interpretation ( Chapter 2 ).

[ITA67 s317(1), (2)(b), (c) and (d) and s322; FA69 s65(1) and Sch5 PtI; FA75 s33(2) and Sch1 PtII; FA97 s146(2) and Sch9 PtII]

391. —(1) In this Chapter—

balancing charges” means balancing charges under Part 9 or Chapter 1 of Part 29 ;

year of claim”, in relation to any claim under section 381 , means the year of assessment for which the claim is made.

(2) For the purposes of this Chapter—

(a) any reference to capital allowances or balancing charges for a year of assessment shall be construed as a reference to those to be made in charging the profits or gains of the trade for that year, excluding, in the case of allowances, amounts carried forward from an earlier year,

(b) effect shall be deemed to be given in charging the profits or gains of the trade for a year of assessment to allowances carried forward from an earlier year before it is given to allowances for the year of assessment, and

(c) any reference to an amount of capital allowances non-effective in a year of assessment shall be construed as referring to the amount to which effect cannot be given in charging the profits or gains of the trade for that year by reason of an insufficiency of profits or gains.

(3) This Chapter shall apply, with any necessary modifications, in relation to a profession or employment as it applies in relation to a trade.

Option to treat capital allowances as creating or augmenting a loss.

[ITA67 s318; FA97 s146(1) and Sch9 PtI par1(23)]

392. —(1) Subject to this Chapter, any claim made under section 381 for relief in respect of a loss sustained in any trade in any year of assessment (in this Chapter referred to as “the year of the loss”) may require the amount of the loss to be determined as if an amount equal to the capital allowances for the year of the loss were to be deducted in computing the profits or gains or losses of the trade in the year of the loss, and a claim may be so made notwithstanding that apart from those allowances a loss had not been sustained in the trade in the year of the loss.

(2) Where on any claim made by virtue of this Chapter relief is not given under section 381 for the full amount of the loss determined under subsection (1), the relief shall be referred, as far as may be, to the loss sustained in the trade rather than to the capital allowances in respect of the trade.

Extent to which capital allowances to be taken into account for purposes of section 392 .

[ITA67 s319; FA97 s146(1) and Sch9 PtI par1(24)]

393. —(1) The capital allowances for any year of assessment shall be taken into account under section 392 (1) only if and in so far as such capital allowances are not required to offset balancing charges for the year, and relief shall not be given by reference to the capital allowances so taken into account in respect of an amount greater than the amount non-effective in the year of assessment for which the claim is made.

(2) For the purposes of subsection (1), the capital allowances for any year of assessment shall be treated as required to offset balancing charges for the year up to the amount on which the balancing charges are to be made after deducting from that amount the amount, if any, of capital allowances for earlier years which is carried forward to that year and would, without the balancing charges, be non-effective in that year.

Effect of giving relief under section 381 by reference to capital allowances.

[ITA67 s320]

394. —Where for any year of claim relief is given under section 381 by reference to any capital allowances, then, for the purposes of the Income Tax Acts, effect shall be deemed to have been given to those allowances up to the amount in respect of which relief is so given, and any relief previously given for a subsequent year on the basis that effect had not been so given to those allowances shall be adjusted, where necessary, by additional assessment.

Relief affected by subsequent changes of law, etc.

[ITA67 s321; FA96 s132(1) and Sch5 PtI par1(18)]

395. —(1) Where relief given to a person by virtue of section 392 (1) for any year of claim is affected by a subsequent alteration of the law, or by any discontinuance of the trade or other event occurring after the end of the year, any necessary adjustment may be made, and so much of any repayment of tax as exceeded the amount repayable in the events that happened shall, if not otherwise made good, be recovered from the person by assessment under Case IV of Schedule D.

(2) For the purpose of an assessment mentioned in subsection (1), the amount of capital allowances by reference to which the repayment was made, or an appropriate part of that amount, shall be deemed to be income chargeable under Case IV of Schedule D for the year of claim and shall be included in the return of income which the person is required to make under the Income Tax Acts for that year.