Section 70 — Income Tax Act 2007: Determining losses in previous tax years

Determining losses in previous tax years 70 1 This section applies for the purposes of sections 67(2) and 68(5) in determining whether a loss, calculated without regard to capital allowances, is made in the trade in any tax year before the current tax year. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 The loss is determined by reference to—

a the profits or losses of periods of account of the trade (calculated for income tax purposes, but without regard to capital allowances), or b if (as a result of section 69) a person claiming the relief is treated as the same person as a company within the charge to corporation tax, the profits or losses of the company's accounting periods (calculated for corporation tax purposes, but without regard to capital allowances), or by reference to both.

4 If—

a a period of account does not coincide with a tax year, or b an accounting period does not coincide with a tax year, any of the steps in section 7A(2) of ITTOIA 2005 may be taken to arrive at the profits or losses made in a tax year. For this purpose references in section 203(2) of that Act ... to periods of account are read as including accounting periods.

5 The steps must be taken in accordance with section 7A(3) or (4) of ITTOIA 2005.

6 A loss in a trade is calculated without regard to capital allowances by ignoring—

a the allowances treated as expenses of the trade under CAA 2001, and b the charges treated as receipts of the trade under that Act.