HM Treasury and HMRC are now consulting on the implementation of the cap on Income Tax reliefs announced in Budget 2012.

By way of reminder the proposed cap will be introduced from 5 April 2013 and will be set at £50,000 or 25% of an individual's income, whichever is greater. The consultation document sets out the scope of the cap and invites comments on the implementation and delivery of the cap, including, in particular, responses to: how an individual's income will be defined and calculated for the purposes of the cap; when the cap will apply; how reliefs will be ordered; and the operation of the cap through Income Tax Self-Assessment.

The reliefs that will be capped are listed in Chapter 2. Tax relief on investment in the EIS will not be included in the cap and the vast majority of other investment in small business is also intended to be unaffected. The consultation mentions that there are a variety of ways in which an individual can obtain tax relief for a loss in their business, either against their general income or against their future profits. While relief against general income will be capped, the ability to offset losses against future profits from the same business will remain unlimited.

It is intended that once responses to the consultation have been received, draft legislation will be published in late Autumn. Comments are requested by 5 October and the consultation document can be accessed from the HMRC website www.hmrc.gov.uk