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'LOSSES ARE ALWAYS deducted before taper applies.' This is a true statement; however there are circumstances when income losses can be offset against capital gains and care is required when making the relevant calculations. The relevant legislation is contained in section 72 Finance Act 1991.
Maximum amount
When calculating the amount of loss available to offset under section 72 account must be taken of the maximum amount as defined in section 72(4). This defines the maximum as the amount on which the claimant would be chargeable to capital gains tax for the year disregarding the annual exemption available under section 3(1) Taxation of Chargeable Gains Act 1992 and the effect of this relief provision. The effect is that the income loss relievable against gains can be restricted by the amount of taper on the gain. Example 1 shows the result of...
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