Tax advisers often feel that there is a large proportion of the population who don't understand quite what the word 'planning' means. In particular, some people don't seem to realise that there is an implication of futurity in the word.

To elucidate, every tax planner has examples of individuals coming to them who have either made a large capital gain (sometimes even in a preceding tax year) or are about to make one in a deal that can't be changed, and are now asking how the capital gains tax can be reduced.

Well, unfortunately, the answer is very often 'it can't be - now'. But there is at least one exception to that.

What we're thinking of is the ability to offset trading losses against capital gains.

Trading losses can take many forms. They can even be incurred, and therefore usable, where there is no actual economic loss at all. One example of this is where a trade begins and assets like plant or machinery, computers, fixtures etc. are either bought or, if already owned, are brought into use for the purposes of this trade. If the trade isn't too big, an allowance of up to 100% of the value can be claimed immediately the trade begins. Think about it. Imagine being able to offset, basically, the whole value of all of the items you're bringing into the business against a capital gain you have made in the same year or the year before (if the trade began in that year).

Many businesses, possibly the majority, incur 'real' losses in their first period anyway. Needless to say, these are eligible for claiming against capital gains as well. In fact, some of these businesses only ever incur losses, such is the way of enterprise and over-optimism, but providing the trade was undertaken on a commercial basis, and with a reasonable expectation of making a profit, at least you could get 28% of the cost back if you use the losses to reduce the tax on your gains.

These gains can be any type of capital gain, including gains from selling pure investments like buy-to-let properties. Sometimes the loss can be incurred in a carefully timed way, even in order to achieve this relief, and the only way the Revenue can deny it is if it thinks the trade isn't a proper one at all.

Obviously, if you are on the borderline here, for example if the trade could be argued by the taxman to be no more than a hobby, the important thing is to gather as much evidence as you can and behave in such a way as to be able to prove that you are trading commercially if challenged.