How do I offset a loss against income?

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How do I offset a loss against income?

Question:

I have made a trading loss in the year of £15,000, other income of £10,000, eligible interest relief available of £6,000 and a chargeable gain of £50,000. If I wish to offset the loss against general income and gains, do I have to use it ‘first’ or can I  claim the interest first and then the loss, thereby making an extra £6,000 of loss available to offset against the gain?

Arthur Weller replies: 
You write about ‘eligible interest relief’ but it is not clear whether you mean ‘qualifying loan interest’ or ‘interest paid on business borrowings’. You should note that if you refer to interest paid on business borrowings, then where profits are calculated on the cash basis (as opposed to the accruals basis) the deduction of loan interest for all cash borrowings is limited to £500 for the period. Assuming, therefore, we are talking here about the accruals basis, the interest relating to the trade can be deducted as a trading expense. It seems to me from HMRC’s Business Income manual (BIM85025 ‘Types of relief - Relief against chargeable gains’ and BIM85080 ‘Claims to relief - Part claims and priority of claims’) that you can claim the interest first, and then the loss, thereby making an extra £6,000 of loss available to offset against the gain.
 

I have made a trading loss in the year of £15,000, other income of £10,000, eligible interest relief available of £6,000 and a chargeable gain of £50,000. If I wish to offset the loss against general income and gains, do

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This question was first printed in Business Tax Insider in March 2020.