Unincorporated trader losses Flashcards
What is S.83 relief?
- Trading losses automatically carried forward and set against future trading losses of same trade (as much as possible as early as possible)
- Offset against trading income before the PA is deducted
What is S.64 relief?
- Where you elect to offset losses against General income (i.e. Trading income and others) in the current year or prior year (in whatever order you feel)
- You must offset as much as possible and would be done before the PA is deducted
What is extended loss carry back?
For tax years 20/21 & 21/22 IF S.64 is claimed, you can carry back for an additional 2 years to offset again trading income (max £2m can be carried back for the additional 2 years) (so total 3 years carried back (4including current TY)).
*remember s.64 is against general income and then extended carry back is against trading income.
What happens if there is a loss in the opening period? How do you treat this?
Losses should be claimed in the first period.
You cannot claim overlap losses when there are overlap months.
What is S72 relief?
S.72 relief is available for trading losses arising in any of the first 4 years of trade. Losses ware carried back and offset against general income in the three preceeding tax years (must claim as much as possible as early as possible (FIFO))
You claim losses for these years on a FIFO basis, offset against earliest profits first.
What is S89 relief?
S.89 relief is available for losses arising from the cessation of trade. Carry back the loss and offset against trading income in the final 4 years of trade. Offset on a LIFO basis (offset against more recent profits first, and keep going back until none left).
What is the administrative timeline for claiming S.64 relief and extended carryback? What happens if you don’t do this?
The claim for s.64 and extended carryback must be made within 12 months of the 31 January following the end of the tax year.
If no claim is made, the losses are automatically carried forward under S.84.
What is the administrative timeline for claiming S.72 relief? What happens if you don’t do this?
You must make the claim within 12 months after the 31 January following the end of the tax year in which the loss arose. This claim would be sufficient for claiming the loss on all tax years in which you make the claim.
How do you calculate the loss relief amount arising from S.89 loss relief?
The amount should be considered as the net trading losses amount from the last 12 months of trade (regardless of the PoA), plus any overlap profits from earlier tax years.
