Extension to Capital Gains (s.71) Flashcards
What triggers a s.71 claim? And why?
Where a person claiming relief for a trade loss against net income (s.64) is unable to make full use of that loss, he may make use of the balance under s.71.
What does a s.71 allow a trader to do? re: capital gain
It enables a person to relieve a trading loss against a current year capital gain.
Is there anything that needs to happen before a s.71 claim is made?
A s.64 claim is ALWAYS made before the s.71 claim.
Will there be any effect on the PA if a s.71 claim is made?
In most situations this will mean the wastage of the PA.
Describe the computation re: s.71 claim? illustration
Capital gains in year
Less: Capital losses in year
Equals: Net Capital gains
Less: s.71 trading losses
Equals: Revised Net Gains
Less: Capital losses b/fdw
Equals: Chargeable gains
What does a s.71 claim effectively do?
It effectively converts a current year income loss into a current year capital loss
What does b/f capital losses do to the AE? re: s.71 claim
Capital losses brought forward reduce the gains to the level of the AE.
In which order is the loss of a s.71 claim relieved?
s.71 trading loss is relieved after current year capital loss but before capital losses b/f i.e.
1st - Capital gain in year
2nd - less Capital losses in year
3rd - less s.71 trading loss
4th - less Capital losses b/f
How is the amount of s.71 relief available determined?
The s.71 relief will be the lower of:
a. the remaining loss after the s.64 claim; and
b. the “relevant maximum” which is the net gains in the tax year, less capital losses brought forward.
What happens to any unutilised losses? re: s.71
Unutilised losses can be carried forward against future profits from the same trade. (ie a s.83 claim)
What is the time limit for the s.71 claim?
There is no time limit to claim s.71 but as the effect of s.71 claim is to extend the s.64 claim, the same time limit should be adhered to.
What does the trade have to be for loss relief to be available? re: continuous trade
No loss relief is available unless the trade is commercial.
What is defined as commercial? re: trade x3
The trade is commercial if it is:
- carried on throughout the basis period for the tax year:
- on a commercial basis; and
- with a view to the realisation of profits
