Trade Losses

Question 1

What are the options for a trading loss in the year?

Answer 1

Set against current year total profits

Carry back and set against total profits in prev 12 months

Carry forward a loss made before 1 April 2017 and set against future trading profits of same trade

Carry forward a loss made after 1 April 2017 and set against total profits of a later accounting period.

Question 2

Current year relief - special rule?

Answer 2

Set against total profits BEFORE deducting qualifying donations - so the donations may be wasted in terms of tax relief

Question 3

What can we do with losses at the end of a business?

Answer 3

Terminal loss relief - set against total profits of the preceding 36 months.

Question 4

What if the terminal loss period is only 8 months?

Answer 4

We would look at the last 12 months and can still carry back a further 36 months prior to that.

Question 5

What can we do with losses of a UK property business?

Answer 5

They can be set off against total profits in the current accounting period.

Question 6

What can we do with losses of an overseas property business?

Answer 6

Carry forward to set against profits of an overseas property business in future accounting periods

Question 7

What about loan relationships and Non-trading deficits?

Answer 7

1. Offset in the current year against ANY profits before charitable donations
2. Carried back against non trade loan relationship income in the previous 12 months.
3. Carried forward against future profits. Pre 1 4 2017 against non-trade income and gains and post 1 4 2017 can be set against TOTAL profits

Question 8

What is the order of using the losses?

Answer 8

Total profits for period
Less: Non-trading deficit
Less: Uk property business loss
Less:Trading losses
TTP

Question 9

Restriction on loss relief. What is the max relief that can be offset against profits in accounting periods after 1st April 2017?

Answer 9

lower of:
Unrelieved deficit?

£5m plus 50% of the companies unrelieved profits above that amount.