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ATX - Condensed Notes > 4b) Business Tax - Income Tax Losses > Flashcards

4b) Business Tax - Income Tax Losses Flashcards

1
Q

For individuals in unincorporated business when the trading losses are carried forward :
1. Automatic / not automatic?
2. How long can you carry forward the losses ?
3. Offset against?
4. Can you restrict ?

A
  1. Automatic
  2. Carried forward indefinitely - if the business carried on the same trade
  3. Must offset agains
    - first available future trading income only
    - of the same trade
  4. Can not restrict offset
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2
Q

For individuals in an unincorporated business - what’s the claim date for trading losses carried forward

A
  • 4 years
  • starting from the end of the tax year
  • where the loss arose
    E.g for 2022/23 loss = 5th April 2027
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3
Q

For individuals in an unincorporated business what’s the loss relief for property losses
1. C/b or c/f?
2. Offset agains what type of income
3. Is partial claim allowed

A
  1. C/f no c/back
  2. Offset against future property income only
  3. Partial claim is not allowed
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4
Q

For individuals in an unincorporated business - maximum deduction from trading income :
- applies to ?

A
  • trading losses from different trade set against :
    1. Current year & PY total income
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5
Q

Formula : For individuals in an unincorporated business - What’s the maximum deduction from trading losses set against total income ?

A

Higher of:
- £50,000, or
- 25% adjusted trading income
(Will be 50k unless ATI is above 200k)

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6
Q

For individuals in an unincorporated business - the maximum deduction of trading losses (50k) does not apply to ?

A
  • does not apply to losses set agains chargeable gain
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7
Q

Calc: For individuals in an unincorporated business -
What’s the calculation for adjusted total income (ATI)

A

Total income - gross personal pension contribution

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8
Q

For individuals in an unincorporated business -
income tax computation
- when to apply the
1. Loss relief b/f
2. Other income
3. Trading income
4. Less: reliefs eg max deduction / standard loss relief / cback loss relied
5. Less : personal allowance

A
  1. Trading income
  2. Loss relief b/f (x)
  3. Other income
  4. Less: relief
  5. Less: personal allowance
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9
Q

For individuals in an unincorporated business -
Describe the standard trading loss relief
1. Offset against?
2. Available in
3. Is there an order we can claim (2)?
4. Can we do partial claims?
5. What happens to the excess loss?

A
  1. Offset against total income
  2. Available in:
    - the tax year of the loss and / or
    - preceding tax year
  3. Claim in any order
  4. No partial claim = all or nothing relief
    = ( can’t restrict offset to preserve PA)
  5. Excess loss automatically c/f unless another claims made e.g against chargeable gains
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10
Q

For individuals in an unincorporated business -
What’s the capital taxable gains computation
(1) capital loss b/f
(2) less: capital losses in the year
(3) chargeable gains in the year
(4) less : annual exempt amount
(5) less:
- claim for income tax loss relief
- CY loss relief and/or
- CBack loss relief

A

(3) chargeable gains in the year
(2) less: capital losses in the year
(5) less: income tax loss relief claims CY/PY
(4) less: annual exempt amount
(1) less : capital losses b/f
= taxable gains

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11
Q

For individuals in an unincorporated business
What’s the annual exempt amount for capital gains in the year

A

AEA: £12,300

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12
Q

For individuals in an unincorporated business
- describe capital losses in the year
1. Offset against ?
2. Is partial claims allowed?
3. When can you carry forward capital losses
4. Is bf capital losses deducted after or before AEA

A
  1. Must offset against current period capital gains if possible
  2. Partial claims not allowed
  3. Carry fwd capital losses If overall net capital loss in CY
  4. capital losses b/f are deducted after the AEA
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13
Q

For individuals in an unincorporated business
- describe trading losses claim agains chargeable losses
1. Set against gains in what year
2. Any restriction of setting agains gains ?
3. Any partial claim?

A
  • Can set against gains in CY and / or PY
  • not available unless set agains total income in CY first
  • income tax loss treated as CY capital loss
  • no partial claim = all or nothing
    = can’t restrict offset to preserve AEA
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14
Q

For individuals in an unincorporated business
- capital loss bf is deducted before or after AEA?

A

CAPITAL LOSS B/f mist deduct after AEA

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15
Q

For individuals in an unincorporated business
- what’s the claim date for standard loss relief and trading losses agains gains

A
  • 12 months from 31st Jan - following the end of the loss tax year
    E.g 2022/23 = 31st Jan 2025
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16
Q

For individuals in an unincorporated business
Describe terminal loss relief
1. How many months of trading is the TLR available for
2. What type of income can you offset it against
3. What years is the relief available to
4. Is there a basis in which it’s claimed
5. Can you restrict the loss to preserve the PA?

A
  1. TLR is available for loss of the final 12 months of trading
  2. Offset agains trading income only
  3. Year of loss if possible, then carry back 3 years before the year of loss
  4. Lifo basis
  5. Cannot restrict offset to preserve the PA
17
Q

Calc: For individuals in an unincorporated business
1. What’s the calculation of terminal loss relief
1a. if the cal includes the following what should you do :
- profit
- losses
- trading profit

A

12months

  1. 6th April before cessation TO Date of cessation
  2. 12 months before cessation TO 5th April before cessation

1a. Ignore profits
- add losses
- add trading profit

18
Q

For individuals in an unincorporated business
What happens to the terminal loss amounts if the standard loss relief is already claimed

A

The terminal loss amount must be reduced by the amount already claimed

19
Q

For individuals in an unincorporated business
- what’s the claim date for terminal loss relief

A

4 years
- starting from end of final trading tax year

E.g for 2022/23 = 5th April 2027

20
Q

For individuals in an unincorporated business
Describe the incorporation loss relief
1. What type of losses is if
2. What type of income can you set it against with
3. When transferring business what type of consideration would be needed
4. How long can you carry forward the loss
5. Is incorporation loss relief given to company
6. Can you restrict the offset

A
  1. Trading losses
  2. Income from company e.g salary and dividends I.e personal income tax of the individual
  3. Business transferred in exchange wholly for shares of mainly for shares (at least 80% of the consideration)
  4. Can carry forward trading losses indefinitely
  5. Not given to company , doesn’t become a corporation tax loss
  6. Cannot restrict the offset

ATX - Condensed Notes (14 decks)

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