Property losses take priority over personal allowances

In her 2017-18 tax return the taxpayer included losses brought forward of about £6 000. These related to property losses that had arisen in 2007-08 2008-2009 and 2012-13. After an enquiry HMRC refused the claim on the basis that that the losses had already been offset against property income for other years in accordance with the steps set out in ITA 2007 s 23.

The taxpayer appealed. This was on the ground that HMRC should use the reliefs and allowances due in a way that resulted in the greatest reduction in the taxpayer’s liability. In essence property losses should not be wasted if there are unused personal allowances available.

The First-tier Tribunal said HMRC was correct. In calculating the taxpayer’s liability to income tax the steps in s 23 must be taken in numerical order. As a result the carried forward property losses are deducted...