Harvesting capital losses

KEY POINTS

• Capital allowances will not always preclude capital losses on plant and machinery sales.
• Allowable losses commonly occur on such sales after trade incorporations.
• Substantial amounts of these losses are still within claim time.

This article is not so much concerned with tax planning for the future rather it aims to encourage practitioners to revisit past events with a view to securing allowable capital losses up to now considered unavailable.

An area commonly seen as barren ground for allowable capital losses is that covering sales of plant or machinery which qualified for capital allowances. This area is covered by TCGA 1992 s 41 “Restriction of losses by reference to capital allowances”. Statutory references are to TCGA 1992 unless otherwise stated.

Most tax professionals subscribe to an article of faith which says:

“A sale of...