11. Trading losses: ind

Question 1

Carrying losses forward relief

• When is it used?
• What is it used against?
• What is its relationship to PA and other allowances?
• How long can it be carried forward?

Answer 1

• Automatic AFTER OTHER CLAIMS
• Against first possible profits from TRADING INCOME ONLY
• Relief in full, can lead to wastage of other allowances
• Carry forward indefinitely.

Question 2

Loss relief against total income claim

• Which periods can it be used in?
• What is its relationship to PA and other allowances?
• What is the maximum loss relief?

Answer 2

• Applies to current and previous tax year.
• Relief in full, can lead to wastage of other allowances
• Maximum deduction for income not trading GREATER of:
  
  • 50,000
  • 25% of ATI (ATI is gross income - gross personal pension contributions)

Question 3

Offsetting losses against capital gains

• Which periods can this be used in?
• What is the maximum claim?
• What is its relationship to PA and other allowances?

Answer 3

• Current and prior year ONLY IF CLAIM AGAINST TOTAL INCOME AGIANST SAME YEAR IS MADE FIRST
• Lower of:
  
  • relevant amount: remaining losses
  • maximum amount:
    Capital gains for year X
    Losses this year (X)
    Losses b/f (X)
    = Maximum amount
• Relief in full BUT BEFORE AEA SO AEA ALWAYS FULLY UTILISED

Question 4

Opening year loss relief

• Which periods can it be used in and on what basis?
• What is it used against?
• What is its relationship to PA and other allowances?
• How are the losses calculated?
• When losses are determined to opening year rules, can you deduct more than one years loss in one year?

Answer 4

• First four years on FIFO method (loss from most recent year carried back to earliest year first)
• Against total income
• Relief in full, can lead to wastage of other allowances
• Losses worked out using self-employed basis of assessment (income already based on tax year)
• No