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What does "ring-fencing" mean especially in relation to property claims?

Posted 1 July 2013 under Tax Q&A


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When earning rental income there is a big section on your tax form to fill out. At the end of this section you specify whether it was a profit or loss (4210 and 4211). For a loss (4211) you get the option of ring-fencing with the text "Should the loss incurred be excluded (ring-fenced) for the calculation of your tax liability?"

What does this option mean? Everything I've read about it is incredibly confusing and full of legal jargon I don't understand. Under what circumstances should you select "yes" or "no" and how does this affect your final tax calculation? I'm asking this in relation to property for which you receive rental income although this option will still be available for any other trade.

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TaxTim TaxTim says:
1 July 2013 at 22:23

This can get very complicated however the basic principle is that you could ringfence the rental income loss to only apply to rental income profits in future years to reduce the tax paid on that profit. This would be a decision you wish to make, but in essence by selecting to ringfince the loss you are delaying the tax benefit of the loss.


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