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TCGA92/S62 (2)

If an individual realises an allowable loss in the part of the tax year before his or her death, those losses must be set first against any chargeable gains accruing in that period. This applies even if it reduces the net chargeable gains below the annual exempt amount for that year.

If there is an excess of allowable losses after this set off those losses may be carried back and set off against gains accruing in the three tax years before the tax year of death. The losses must be set off against gains of a later year first. Losses carried back in this way are only set off so that the net chargeable gains are reduced to the amount of the annual exemption for the year. Any losses that are not set against gains accruing before death are lost. They cannot be used by the personal representatives or the legatees.

The losses cannot be set against gains attributed to the individual by TCGA92/S87 or TCGA92/S89(2).

The legislation does not provide any specific procedures or time limits for dealing with claims to carry back losses of the year of death. The normal procedures and time limits relating to claims will therefore apply.

Example

Mrs G died on 30 September 2017. In the period 6 April 2017 to 30 September 2017 she realised chargeable gains of 拢1000 and allowable losses of 拢10,000. In the three preceding years of assessment her net chargeable gains were

Year	Amount
2014-15	拢20,000
2015-16	拢 3,000
2016-17	拢 12,000

1) Firstly set the 2017-18 losses against her gains of that year.

2017-18	Amount	Amount
Chargeable Gains	-	拢1,000
Allowable losses	拢10,000	-
Set Off	拢1,000	拢1,000
Net chargeable gains	-	Nil
Excess losses available to carry back	拢9,000	-

2) Set off excess losses against gains of earlier years, considering later years before earlier years. Therefore consider 2016-17 first.

2016-17	Amount	Amount
Chargeable gains	-	拢12,000
Covered by annual exemption	-	拢11,100
-	-	拢900
Limit set off to	-	拢900
Net chargeable gains	-	Nil
Allowable losses brought back	拢9,000	-
Set-off 2016-17	拢900	-
Excess loss to carry back	拢8,100	-

3) Consider next 2015-16

Net chargeable gains of 拢3000 are already wholly covered by annual exemption. Therefore none of the losses brought back should be set against these gains.

4) Consider next 2014-15

2014-15	Amount
Chargeable gains	拢20,000
Covered by annual exemption	拢11,000
Available to set loss against	拢9,000

As this exceeds the losses brought back of 拢8,100 can be used for 2014-15

-	Amount
Net chargeable gains before set off	拢20,000
less losses brought back	拢8,100
Revised net chargeable gains for 2014-15	拢11,900
less annual exemption	拢11,000
Gains chargeable to tax	拢900

Note

Had the chargeable gains for 2014-15 been only 拢15,000 so that the excess over the annual exemption was only 拢4,000 then the set off would have been limited to 拢4,000. The benefit of the remaining losses of 拢4,100 (拢8,100- 拢4,000) would have been lost as these losses could not be set off against any other chargeable gains. They cannot be carried back to any earlier years. Also they cannot be carried forward to set against any gains accruing to the personal representatives or the legatees.

See TSEM 7200 onwards and SAM 90000-90001 and SAM90010 for guidance on the action to be taken by the responsible office and CH54200 for guidance on the time limits for making assessments.