Explain the significance of tax-adjusted losses
Describe the reliefs available for trading losses and give effect to the optimum loss relief claims
Describe relief for non-trading losses capital losses
Define a group for the purposes of group loss relief
Identify the claimant and surren...
Explain the significance of tax-adjusted losses
Describe the reliefs available for trading losses
Give effect to the optimum loss relief claims
Describe relief for non-trading losses
Explain the relief for capital losses
TAX ADJUSTED LOSSES
If adjusting the profit or loss in the income statement produces a negative amount, that is a tax
adjusted trading loss.
Change it to NIL and continue with other income, chargeable gains and Gift Aid
Consider relief for trading losses
ADJUSTED LOSS: EXAMPLE
A Ltd has profit before tax of £30,000. Included in that amount is rental income of £45,000. There are no
other tax sensitive items.
Profit before tax 30,000
Less: rental income (45,000)
Adjusted loss (15,000)
Trading income NIL
Rental income 45,000
PCTCT* 45,000
*before loss relief
LOSS RELIEF
1. Carry forward
Current period set off against total profits
2. One year carry back against total profits, extended temporarily to three years
3. Terminal loss relief
, CARRY FORWARD OF TRADING LOSSES
A trading loss incurred on or after 1 April 2017 may be carried forward and set against total
profits of later periods
A trading loss incurred before 1 April 2017 may only be carried forward and set against future
trading profits of same trade
For both types of losses, a company may stipulate the amount of loss relief to be given in a later
period
There is no need to relieve the loss at the earliest opportunity
RESTRICTION ON LOSSES CARRIED FORWARD
There is no restriction on the set-off of losses brought forward if profits do not exceed £5m
However if profits exceed £5m, only half of the excess will be available to absorb losses brought
forward.
This restriction applies irrespective of when the losses were incurred.
Before April
After April
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