531AU Capital allowances and losses

Summary

This section contains the rules for determining the amount of the losses and capital allowances that are deductible in computing a person’s chargeable relevant income where an exception was made, in the case of those losses and capital allowances, to the general rule (contained in section 531AM) disallowing any deductions in computing total income.

Details

(1) Unused trading or professional losses that are carried forward to a later year of assessment in accordance with section 382 may be deducted in computing the amount of a person’s relevant income that is to be chargeable to USC. The amount to be deducted is the amount of the loss that is actually used in that later year to reduce the person’s taxable income from the same trade or profession in which the carried forward loss originally arose.

(2) The type of capital allowances that are deductible in computing the amount of a person’s relevant income that is to be chargeable to USC are specified. These are wear and tear allowances for plant and machinery (section 284(1)), writing-down allowances for industrial buildings and structures (section 272(3)), allowances for farm buildings and structures (section 658(2)) and allowances for farm buildings and pollution control (659(2)). The part of the relevant section that specifies the amount of the particular allowance that can be deducted in respect of income tax for a year of assessment, and applied for USC purposes, is specified. The deductible amount of the allowance is the amount that is used in the year in which it is given (apart from any allowance that is used to create or increase a loss under section 392 and used against other income in that year under section 382) and any unused allowance carried forward from an earlier year of assessment in accordance with section 304(4). However, capital allowances are not deductible where they are given to lessors of assets and buildings or to non-active partners in a trade carried on by a partnership (within the meaning of section 409A).

Relevant Date: Finance Act 2021