485F Carry forward of excess relief

Summary

Excess relief is the amount of the increase in taxable income in a tax year by virtue of section 485E. It equates to the amount by which all specified reliefs are restricted. It does not distinguish between reliefs, or the nature of the various reliefs restricted, as various elements are pooled in one amount and carried forward for deduction from total income in the following year. Excess relief is, in effect, a separate tax relief in its own right.

Excess relief carried forward to a year is given as a deduction from total income in the normal way in calculating taxable income. Excess relief carried forward is itself a specified relief in the (later) year in which it is used and is subject to restriction in that year. To the extent that “excess relief” cannot be used in the later year, it can be carried forward again. Where “excess relief” is carried forward to a year, other tax reliefs are allowed in priority to the “excess relief”.

Details

(1) This provision provides for the carry-forward of “excess relief” from the year in which reliefs are restricted to the next year, subject to the “excess relief” carried forward being taken into account in deciding whether the restriction applies in the later year i.e. if it is used in the later year.

(2) Excess relief carried forward to a year and un-used in that year because of an insufficiency of income is carried forward, and allowed, in subsequent years. This, again, is subject to the rule that the “excess relief” used in the year to which it is carried forward must be taken into account in deciding whether the restriction applies.

(3) Where “excess relief” is carried forward to a tax year, reliefs other than the “excess relief” are given in priority to the “excess relief”.

Relevant Date: Finance Act 2021