Chapter 9: Trading losses

Question 1

How to record a trading loss

Answer 1

Nil

Question 2

The trader can choose to set trading losses against total income of the tax year of the loss and/or the preceding tax year

Answer 2

This year, or
Last year, or
This, then last, or
Last, then this, or
Don’t claim at all

Question 3

Can you restrict a loss to preserve personal allowance

Answer 3

NO

Question 4

Can loss relief be restricted to preserve the capital gains tax (CGT) annual exempt amount

Answer 4

NO

Question 5

Current year and prior year relief

Answer 5

Against TOTAL income

Question 6

Carry forward losses

Answer 6

Must carry it forward against first available profit of the same trade

Question 7

factors influencing which loss relief to use

Answer 7

Marginal rates of tax
The utilisation of personal allowances
Cash flow

Question 8

Losses in the opening 4 years of trade

Answer 8

FIFO

Carried back and set against total income of the three tax years proceeding the year of the loss on a a FIFO basis

Question 9

Terminal loss

Answer 9

Loss incurred in the last 12 months of trading

Set the terminal loss against trading profits :
of the year of cessation and then
the 3 preceding years working backwards LIFO

Question 10

Cap on loss relief

Answer 10

Higher of
50,000
25% of total income

Question 11

Property business losses

Answer 11

carry forward against future property business profits