Ch10: Trading Losses

Question 1

Loss Relief is against total income of:

Answer 1

• TY in which the loss was suffered (CY Claim)
• Preceding TY (C/B Claim)

Question 2

When do the claims for loss relief against total income need to be made by?

Answer 2

31 January (22 months after the end of the TY).

Question 3

The cap on income tax relief against general income is the HIGHER OF:

Answer 3

(a) £50,000
(b) 25% of the person’s total income.

Question 4

How many years can loss be C/F for?

Answer 4

Can be set off WITHIN 4 YEARS of the end of the TY in which the loss arose.
(E.g. 2023/2024 loss = 5 April 2028).

Question 5

How to calculate losses in opening years?

Answer 5

(1) Early Trade Loss Relief
- Relief available for losses incurred in the first 4 TYs.
- Loss can be C/B for 3 TYs on a FIFO basis.

(2) C/F Relief.

(3) Loss relief against Total Income.

Question 6

Terminal Loss Relief -
A loss arising in the final TY of assessment may be relieved by loss relief against general income within…

Answer 6

TLR allows relief against trading profits of the TY of cessation and the 3 preceding TYs on a LIFO basis

Question 7

When considering the choice of loss relief what should be considered?

Answer 7

1. Marginal Rates of Tax =
   offsetting in the years we pay more tax.
2. Timing of Tax Payments/Repayments =
   C/B of a loss could result in a refund of the relevant amount of tax paid.
3. Possibility of PA =
   SI NRB and DI NRB being wasted as the payer cannot specify the amount of loss that they wish to use.