Relieve trading losses by each programme's rule

changelog.d/trading-loss-allowance-election.fixed.md

@@ -0,0 +1 @@
+- Base the trading allowance election on losses supplied for that tax year, preserving earlier Class 4 loss balances when later loss inputs are unset.

changelog.d/trading-loss-company-merge.fixed.md

@@ -0,0 +1 @@
+- Fixed Universal Credit trading-loss netting to include company trade results.

changelog.d/trading-loss-relief.added.md

@@ -0,0 +1 @@
+- Added Income Tax trade loss relief against general income under ITA 2007 s.64, subject to available net income and the s.24A relief cap.

changelog.d/trading-loss-relief.changed.md

@@ -0,0 +1,2 @@
+- Uprated trading losses separately from profits, applied programme-specific UC and tax-credit income rules, and included losses as negative market and HBAI income. Income Tax carry-forward now uses only explicitly supplied unrelieved losses; Class 4 retains its separate automatic loss history.
+- Coordinated the taxpayer's trading allowance election with current-year Income Tax and Class 4 loss relief, retaining whichever gives the greater current-year income deduction.

policyengine_uk/data/uprating_indices.yaml

@@ -125,6 +125,7 @@ gov.economic_assumptions.yoy_growth.obr.per_capita.gdp:
 - uc_reported_capital
 gov.economic_assumptions.yoy_growth.obr.per_capita.mixed_income:
 - self_employment_income
+- trading_loss
 gov.economic_assumptions.yoy_growth.obr.private_pension_index:
 - private_pension_income
 gov.economic_assumptions.yoy_growth.ons.population:

policyengine_uk/parameters/gov/hmrc/income_tax/bases/taxable_self_employment_income_deductions.yaml

@@ -9,8 +9,8 @@ metadata:
   label: Deductions from self-employment income
   period: year
   reference:
-    - title: "Income Tax Act 2007, s. 64"
-      href:  https://www.legislation.gov.uk/ukpga/2007/3/section/64
+    - title: "Income Tax Act 2007, s. 83"
+      href:  https://www.legislation.gov.uk/ukpga/2007/3/section/83
     - title: "Capital Allowances Act 2001, s. 1"
       href:  https://www.legislation.gov.uk/ukpga/2001/2/section/1
     - title: "Income Tax (Trading and Other Income) Act 2005, s. 783A"

policyengine_uk/parameters/gov/hmrc/income_tax/reliefs/cap/README.md

@@ -0,0 +1 @@
+# Cap on certain reliefs

policyengine_uk/parameters/gov/hmrc/income_tax/reliefs/cap/amount.yaml

@@ -0,0 +1,13 @@
+description: Reliefs against general income listed in ITA 2007 s.24A, such as trade loss relief, are limited to the greater of this amount and a share of adjusted total income.
+values:
+  0000-01-01: .inf
+  2013-04-06: 50_000
+metadata:
+  label: Cap on certain income tax reliefs, fixed amount
+  period: year
+  unit: currency-GBP
+  reference:
+    - title: Income Tax Act 2007 s. 24A(3)
+      href: https://www.legislation.gov.uk/ukpga/2007/3/section/24A
+    - title: Finance Act 2013 Sch. 3 (cap introduced from 2013-14)
+      href: https://www.legislation.gov.uk/ukpga/2013/29/schedule/3

policyengine_uk/parameters/gov/hmrc/income_tax/reliefs/cap/rate.yaml

@@ -0,0 +1,14 @@
+description: Reliefs against general income listed in ITA 2007 s.24A, such as trade loss relief, are limited to the greater of a fixed amount and this share of adjusted total income.
+values:
+  # No cap before 2013-14: the fixed amount is infinite then.
+  0000-01-01: 0
+  2013-04-06: 0.25
+metadata:
+  label: Cap on certain income tax reliefs, share of adjusted total income
+  period: year
+  unit: /1
+  reference:
+    - title: Income Tax Act 2007 s. 24A(3)
+      href: https://www.legislation.gov.uk/ukpga/2007/3/section/24A
+    - title: Finance Act 2013 Sch. 3 (cap introduced from 2013-14)
+      href: https://www.legislation.gov.uk/ukpga/2013/29/schedule/3

policyengine_uk/tests/policy/baseline/finance/benefit/family/housing_benefit/applicable_income/housing_benefit_trading_loss.yaml

@@ -0,0 +1,94 @@
+# HB Regs 2006 reg 38(10) prohibits offsetting a loss against another
+# self-employed or employed job. Regs 36(3) and 39 specify separate tax/NI
+# deductions; hold these and other benefit receipts at nil to isolate the
+# trading-loss rule from annual-tax and other-benefit interactions.
+# https://www.legislation.gov.uk/uksi/2006/213/regulation/38
+# https://www.legislation.gov.uk/uksi/2006/213/regulation/36
+# https://www.legislation.gov.uk/uksi/2006/213/regulation/39
+
+- name: A trading loss does not offset another trade's Housing Benefit income
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    would_claim_uc: false
+    self_employment_income: 12_000
+    trading_loss: 8_000
+    income_tax: 0
+    national_insurance: 0
+    tax_credits: 0
+    working_tax_credit: 0
+    child_tax_credit: 0
+    income_support: 0
+    jsa_income: 0
+    esa_income: 0
+    pension_contributions: 0
+    housing_benefit_tariff_income: 0
+    housing_benefit_applicable_income_disregard: 0
+    housing_benefit_applicable_income_childcare_element: 0
+    housing_benefit_applicable_amount: 10_000
+    housing_benefit_non_dep_deductions: 0
+    LHA_eligible: false
+    rent: 9_000
+  output:
+    housing_benefit_applicable_income: 12_000
+    # Eligible rent 9,000 less 65% of (12,000 - 10,000) = 7,700.
+    housing_benefit_entitlement: 7_700
+
+- name: A loss-making trade does not offset employed Housing Benefit income
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    would_claim_uc: false
+    employment_income: 12_000
+    self_employment_income: 0
+    trading_loss: 20_000
+    income_tax: 0
+    national_insurance: 0
+    tax_credits: 0
+    working_tax_credit: 0
+    child_tax_credit: 0
+    income_support: 0
+    jsa_income: 0
+    esa_income: 0
+    pension_contributions: 0
+    housing_benefit_tariff_income: 0
+    housing_benefit_applicable_income_disregard: 0
+    housing_benefit_applicable_income_childcare_element: 0
+    housing_benefit_applicable_amount: 10_000
+    housing_benefit_non_dep_deductions: 0
+    LHA_eligible: false
+    rent: 9_000
+  output:
+    housing_benefit_applicable_income: 12_000
+    housing_benefit_entitlement: 7_700
+
+- name: The same Housing Benefit claimant with a zero-profit trade
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    would_claim_uc: false
+    employment_income: 12_000
+    self_employment_income: 0
+    trading_loss: 0
+    income_tax: 0
+    national_insurance: 0
+    tax_credits: 0
+    working_tax_credit: 0
+    child_tax_credit: 0
+    income_support: 0
+    jsa_income: 0
+    esa_income: 0
+    pension_contributions: 0
+    housing_benefit_tariff_income: 0
+    housing_benefit_applicable_income_disregard: 0
+    housing_benefit_applicable_income_childcare_element: 0
+    housing_benefit_applicable_amount: 10_000
+    housing_benefit_non_dep_deductions: 0
+    LHA_eligible: false
+    rent: 9_000
+  output:
+    housing_benefit_applicable_income: 12_000
+    housing_benefit_entitlement: 7_700

policyengine_uk/tests/policy/baseline/gov/dwp/tax_credits/tax_credits_applicable_income_trading_loss.yaml

@@ -0,0 +1,78 @@
+# SI 2002/2006 reg 3(1) Step 4: a trading loss in the year is subtracted from
+# the income of Steps 1 to 3, so it reduces the claimants' joint income.
+
+- name: A trading loss reduces the claimant's other income
+  period: 2024
+  absolute_error_margin: 0
+  input:
+    people:
+      claimant:
+        age: 40
+        employment_income: 20_000
+        trading_loss: 5_000
+    benunits:
+      benunit:
+        members: [claimant]
+    households:
+      household:
+        members: [claimant]
+  output:
+    tax_credits_applicable_income: 15_000
+
+- name: One partner's loss reduces the couple's joint income
+  period: 2024
+  absolute_error_margin: 0
+  input:
+    people:
+      claimant:
+        age: 40
+        employment_income: 20_000
+      partner:
+        age: 38
+        trading_loss: 8_000
+    benunits:
+      benunit:
+        members: [claimant, partner]
+    households:
+      household:
+        members: [claimant, partner]
+  output:
+    tax_credits_applicable_income: 12_000
+
+- name: Income does not go below zero
+  period: 2024
+  absolute_error_margin: 0
+  input:
+    people:
+      claimant:
+        age: 40
+        employment_income: 3_000
+        trading_loss: 9_000
+    benunits:
+      benunit:
+        members: [claimant]
+    households:
+      household:
+        members: [claimant]
+  output:
+    tax_credits_applicable_income: 0
+
+- name: A child's trading loss does not reduce the claimants' income
+  period: 2024
+  absolute_error_margin: 0
+  input:
+    people:
+      claimant:
+        age: 40
+        employment_income: 20_000
+      child:
+        age: 15
+        trading_loss: 5_000
+    benunits:
+      benunit:
+        members: [claimant, child]
+    households:
+      household:
+        members: [claimant, child]
+  output:
+    tax_credits_applicable_income: 20_000