What is an allowable loss?
You calculate an allowable loss in the same manner as a chargeable gain. You may only use a capital loss once, and you may not use it against income. You may not carry back a loss for set off against gains of earlier years, except in the case of a terminal loss
on death. In such a case, you can carry back the terminal loss against gains of the three tax years immediately preceding the year of death.
An unused loss is automatically carried forward for set off against gains in the following tax year.
Capital allowances attaching to an asset are ignored in computing a chargeable gain. If a disposal results in an allowable loss, the capital allowances claimed (if any) are removed from the acquisition cost.
Unless one of you elects for separate treatment, your allowable losses can be offset against gains of your spouse, and vice versa.
“Bed and breakfast” transactions
Toward the end of the tax year, you may have a taxable gain but have no loss to offset against the gain. If you have a holding of shares with in-built losses, you may dispose of those shares in order to crystallise the “paper” loss. You may even re-acquire the same shares a few weeks later at a reduced price.
In order to counteract such practices (particularly over a period that spans the last day of the tax year, i.e., 31 December), you may not set against other chargeable gains a loss generated by a disposal and acquisition within the same four-week period. You may set such a loss against the chargeable gain, which eventually arises on the reacquired shares.
This applies a LIFO (Last In First Out) rule to disposals within the four-week period, in contrast to the general FIFO (First In First Out) rule used to identify share disposals with share acquisitions. The end result is that the latest disposal will have a depressed acquisition cost closer to the disposal date, thus reducing or eliminating the paper loss.
Negligible value claims
If you have an asset that has become worthless, you can make a negligible value claim to Revenue to treat the asset as having been disposed of at negligible value. This will then crystallise the inbuilt loss and allow that loss to be used against other gains.
Development land losses
You may not set an “ordinary” allowable loss against a development land gain, but you can set a development land loss against an “ordinary” gain.