Taxes Consolidation Act 1997 section 393

Extent to which capital allowances to be taken into account for purposes of section 392

Section 393 sets out the rules governing the extent to which capital allowances may be used to create or increase a trading loss, ensuring that allowances already needed to absorb balancing charges are not also counted in the loss computation.

• Capital allowances for a year of assessment may only be taken into account in computing a trading loss under section 392(1) to the extent that they are not required to offset balancing charges arising in that same year.
• In determining how much of the current year's allowances are "used up" by balancing charges, any capital allowances brought forward from earlier years that would otherwise be non-effective are applied against those balancing charges first.
• Only the portion of a balancing charge not already absorbed by brought-forward allowances is treated as consuming the current year's capital allowances, thereby reducing what is available for the loss computation.
• The loss relief available under section 392(1) cannot exceed the amount of capital allowances that remain genuinely non-effective — that is, unabsorbed by any assessment — in the year for which the claim is made.

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