Finance Bill 2013: Caps on income tax reliefs

Finance Bill 2013: Caps on income tax reliefs


Author: Niall Murphy

The draft Finance Bill 2013, published on 11 December, includes a cap on the amount of income tax relief that tax payers can receive, where the relief itself is not already capped.

The cap is due to apply for claims for relief for the 2013/14 tax year onwards and restricts the amount of income tax losses for which relief can be obtained in any tax year to either £50,000 or 25% of earnings, whichever is greater.


The cap will only apply to reliefs that are offset against general income.

The reliefs which are affected by this cap include: 

  • trade losses 
  • property losses 
  • employment losses 
  • interest payments

However, shares on which either Seed EIS or EIS income tax relief has been claimed and retained are not included. In such cases, the full loss on such shares can be claimed against income if the investor so claims.

However, the proposals do not help investors who only claim EIS deferral relief. This may arise, for example, where the individuals are not eligible for income tax relief because they and their associates own more than 30% of a company's shares or were a director of the company before they subscribed for their shares. In these circumstances their loss relief will be restricted.


It appears that losses on EIS/SEIS shares have been excluded from the cap as a result of successful lobbying by the industry.

Restrictions on interest relief could be significant for tax payers who have entered into certain types of film-leasing schemes where interest relief can form an important component of the economics of the scheme.

Where possible, taxpayers should take steps to utilise losses earlier rather than later, so as to avoid these restrictions.