390 Amount of assessment under section 238 to be allowed as a loss for certain purposes

Summary

Where an assessment under section 238 is made in respect of certain payments on a person carrying on a trade or profession, the amount of the assessment may, in certain circumstances, be treated as a loss sustained in that trade or profession for the purposes of sections 382 and 385 to 389.

Details

(1) & (3) This section applies to a person who has been assessed under section 238 for a year of assessment in respect of a payment made wholly and exclusively for the purposes of the trade or profession carried on by that person. Where the section applies, the amount of the assessment is treated as a loss sustained in the trade or profession concerned and relief in respect of such loss is allowed either by way of carry-forward under section 382 or as a terminal loss under section 385.

It should be noted that relief is not allowable under this section unless the tax assessed under section 238 on the payment concerned has actually been paid.

Excluded from the relief are payments which the payer does not ultimately bear or which are charged to capital. Also excluded from the relief are payments which are chargeable under section 238 by virtue of certain other provisions. The payments concerned are —

• payments of yearly interest by companies and payments of such interest to non-residents (section 246(2)),
• payments of capital sums on the sale of patent rights (section 757), and
• rents paid to non-residents (section 1041(1)).

(2) Included within the scope of the section are payments made before a trade or profession had been set up and commenced if the section would have applied to those payments had they been made at the time the trade or profession had been actually set up and commenced. This relief for pre-trading payments applies to the exclusion of any other relief which may be available for the payment. This extension of the scope of the relief only applies where the trade or profession is set up and commenced on or after 22 January, 1997.

Relevant Date: Finance Act 2019