Spring Budget 2017: anti-avoidance measures for tax treatment of trading stock

Businesses will no longer be able to convert capital losses into trading losses under an anti-tax avoidance measure introduced in the Budget 2017

This rule will remove an election in the tax code that allows businesses to convert losses attributable to a period for which the asset was a capital asset into more flexible trading losses. The move addresses an unfairness in the current rules that can be exploited for avoidance, the government said.

In its first year, the government expects it will generate £25m in 2016-17, and £15m per year thereafter until 2021-22 – a total of £85m.

The government’s impact note states it expects the move will have a ‘negligible’ effect on business, with ‘up to 50 businesses per year’ incurring ‘one-off costs’.

The measure will have immediate effect by preventing the election being made for appropriations into trading stock made on or after 8 March 2017.

Corporate Tax and Income Tax: tax treatment of trading stock can be read here.

Calum Fuller |Assistant editor, Accountancy magazine (up to 2018)

Calum Fuller is former assistant editor of Accountancy magazine and Accountancy Daily, published by ...

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