Revenue Note for Guidance
This section provides relief by way of set-off in the current year or carry-forward to a subsequent year for losses incurred in transactions which if a profit had arisen would have been chargeable under Case IV of Schedule D. The losses may only be set off, or carried forward for set-off, against other Case IV income.
(1) Where in any year of assessment a person sustains a loss in a transaction (whether the transaction was engaged in by the person either solely or in partnership) which if a profit had arisen from it would have been chargeable under Case IV of Schedule D, the person may claim relief for the loss. The relief takes the form of a set-off against any Case IV assessment made on the person for the year of assessment in which the loss is incurred. Any part of the loss which cannot be relieved by such a set-off may be carried forward for setting against a Case IV assessment in a subsequent year.
(2) Where a “Case IV” loss is sustained by a partnership, the loss to be set against the other Case IV income of the year of loss or carried forward to a subsequent year is the individual partner’s loss and not the partnership’s loss as a whole. In other words, a “Case IV” loss made by a partner in a firm is treated as an individual loss and can only be set against or carried forward against that partner’s own share of the firm’s other or future “Case IV” income. If the partner leaves the firm, his/her losses cannot be utilised by set-off or carry-forward against the other or future “Case IV” income of the remaining partners.
(3) Any relief given by way of carry-forward is to be given, as far as possible, from the Case IV assessment for the year immediately following the year in which the loss arises. Any balance of relief is given from the next such assessment and so on.
Relevant Date: Finance Act 2021