Budget 2008 - Trade losses for individuals...
... are being restricted for tax purposes. At present an individual who carries on a trade, on however part-time a basis, can, subject to certain detailed restrictions, set this loss off against other income and gains. Anti-avoidance legislation introduced in the 2007 Finance Act restricted the offset of tax losses for non-active or limited partners. In the Revenue’s view this merely resulted in individuals entering into loss-making trades on a sole trader basis purely for the tax relief on the losses. As a result this legislation is being introduced with effect from 12 March 2008 for individuals who spend less than ten hours a week on a sole trader activity; for existing trades the loss relief is restricted to £25,000 pa and for new trades, where tax avoidance is a motive, offset relief is abolished.
This is clearly designed to counter the sale of certain investment products that relied on tax losses as part-funding. However, they may well affect other genuine arrangements that “just happen” to meet the tests.
