Ch21: Loss Relief for Single Companies

Question 1

Proforma for Computing Trading Losses.

Answer 1

Profit/Loss BEFORE Taxation
Expenditures Not Deductible for Tax
LESS Items Not Taxed as Trading Income
EQUALS Trading Loss

E.g. for Items Not Taxed as Trading Income
(1) Income Assessable under Other Categories
(2) Non-Taxable Income
(3) Capital Allowances on Plant & Machinery

Question 2

How long do you have to claim CY Loss Reliefs?

Answer 2

CY Loss Reliefs must be claimed WITHIN 2 YEARS of when the loss was made.

Question 3

How long do you have to claim C/B Loss Reliefs?

Answer 3

You have UP TO 12 MONTHS to claim back the C/B Losses.

However, you need to claim CY Losses first = LIFO BASIS.

Question 4

How to C/F Losses as:
(i) Sole Trader
(ii) Company

Answer 4

(I) SOLE TRADERS - must C/F Losses against future profits of the SAME TRADE.

(ii) COMPANIES - must C/F against TOTAL PROFITS either wholly or partly.

Question 5

How ‘Rate of CT Saved’ will play a part in choosing which relief to choose?

Answer 5

RATE OF CT SAVED =
- FY22 = 19%
- FY23 = 19 / 25 / 26.5% depending on AP

19% = < £50k
25% = £250k+
£50k - £250k = First £50k = 25% and remainder = 26.5%.

Question 6

How ‘Timing’ will play a part in choosing which relief to choose?

Answer 6

TIMING =
- C/B =
(1) Quicker relief as we have already paid tax.
(2) Potential tax repayments

• CY = Quicker reliefs
• C/F = Least prepared.

Question 7

How ‘QCDs’ will play a part in choosing which relief to choose?

Answer 7

QCDs =
- CY and C/B = Relief may get lost as we can’t choose how much loss to offset.

• C/F = Partial claims can be made = Will help preserve QCDs.

Question 8

How many years can you C/B when ceasing trade (Terminal Loss Relief)?

Answer 8

C/B is extended to 3 years for losses incurred in the 12 months prior to cessation.

Question 9

How to offset Property Business Losses?

Answer 9

• Offset against TOTAL PROFITS and then C/F against FUTURE PROFITS.
• C/F loss relief must be made WITHIN 2 YEARS.
• No C/B available.

Question 10

C/F loss relief against Property Business Losses must be claimed within?

Answer 10

2 years.

Question 11

Can you C/B Property Business Losses?

Answer 11

No.

Question 12

How to offset Capital Losses?

Answer 12

Offset against CY CHARGEABLE GAINS ONLY.

Then C/F.