Restricted Losses Tax Cap Proposal

A lot of businesses have made significant losses in the current recession and will no doubt continue to make losses for a certain period. Losses made outside of a company can generally be set-off against the businesspersons other income, or in some cases their gains, without limit. There are restrictions on the use of losses made from a business where the trader is not actively involved and losses are often created by the significant amount of interest the business has to pay to the bank.

As of  April 2013 the Government is proposing to cap the amount of loss relief and interest relief given in any one tax year to the higher amount of:

  • £50,000; and
  • 25% of the taxpayer’s income

The restrictions on losses and interest may affect business decisions you have taken, or are about to make in the next few months.  Contact Phil Morgan in our tax team who can advise how these restrictions may impact you.

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