S67, S70 Income Tax Act 2007

The loss incurred in a tax year is caught by the five year rule where a loss computed without regard to capital allowances is incurred in each of the five preceding tax years. The year of commencement is not counted for this purpose so, in the case of a new business which makes losses consistently, the loss of the seventh tax year is the first to be caught.


Henry Green commenced trading as a farmer on 6 April 2001 and makes up his accounts annually to 5 April. His results were as follows:

Period of account Trade profit or loss (excluding CA) Capital allowances
Year ended 5.4.02 Loss £1600
Year ended 5.4.03 Loss £500
Year ended 5.4.04 Loss £1250
Year ended 5.4.05 Loss £3040 £1240
Year ended 5.4.06 Loss £4030 £930
Year ended 5.4.07 Loss £3600 £1400
Year ended 5.4.08 Loss £5750 £1050
Year ended 5.4.09 Loss £4750 £850
Year ended 5.4.10 Loss £5900 £700
Year ended 5.4.11 Profit £900 £1300
Year ended 5.4.12 Loss £7100 £1000
Year ended 5.4.13 Loss £8480 £880

Henry claimed trade loss relief against general income for all available years. Relief was available or restricted as follows:

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