No relief from USC for losses in one trade against profits in another

T

trg

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Hey there,

Just computing a IT return on ROS offline and it seems that a loss in one trade can be used to reduce taxable income it can not go against USC - is this the case?

Seems mighty unfair to me as I would have thought that both current year results would be taken into account and not just the profit. After all the losses were financed by the profits of trade 1.

Trade 1 - Profit 30k - Health and Safety Consultant
Trade 2 - loss 12k - 1st year farmer

Tax is calculated on 18k but the USC is calculated on 30k

I assume if its on ROS Offline its not too far wrong but I was wondering if its categoric?

And also others views on the fairness of the particular situation

TRG
 
Yeah ROS offline is calculating it correctly.

The 12k loss is allowed as a deduction in revising Total Income by virtue of an election under S.381. However the definition of "relevant income" for charging USC, as set out in S.531AM(1)(b) is income from all sources as estimated in accordance with the Tax Acts before deductions that are usually allowed when calculating either total income or taxable income for income tax purposes. Hence your S.381 losses fall out here, and aren't deducted for USC purposes.

However, in relation to your comment on fairness: If the taxpayer doesn't elect to set the loss off sideways in the current year and carries it forward against future income from the same trade, then they will get relief from USC on it in that year (S.531AM(1)(b)(vi) and S.531AU(1)).

So, you have a choice between choosing the "unfair" option and foregoing relief from USC on the loss in order to get tax relief on it now, or wait until the next profitable year, hope there's a profit AND hope they don't change the rules...

It's all set out in S.531AM TCA 97 - Guidance Notes with some kind of attempt to make the legislation understandable here: [broken link removed]
 
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