Unincorporated trading loss

Question 1

What is a trading loss?

Answer 1

When adjusted profits after capital allowances is negative and £nil for income tax purposes

Question 2

What is S83 and S64 in regards to reliefs for trading loss?

Answer 2

S83: default where you offset against first available future profits of trading income (limit of 4 years of end of TY)

S64: offset loss against TOTAL income in CY/PY
Could be either one or other or both in any order (limit of 12 months from 31 Jan after TY)

Question 3

What is the restriction on offsetting losses on other (non-trade) income for non-active traders and everyone else?

Answer 3

Non active spend less than 10 hrs per week working. They have a max of £25,000 under S64

Others: Cap on income tax relief is greater of £50,000 and 20% of Adj total income

Question 4

Whats the formula for adj total income? How do you calculate personal pension contribution?

Answer 4

total income + payroll giving – gross personal pension contribution

PPC= Amount x (100/80)

Question 5

What are special relief for trading losses (S72, S89) and give limits

Answer 5

Opening year loss relief: Relief on losses of TOTAL INCOME incurred within first 4 years of trade using FIFO (limit: 12 months from 13 Jan of TY)

Terminal loss relief: relief on losses on TRADING INCOME of 3 PYs on LIFO within 4 years of end of TY of trade