Trading Losses (1)

Question 1

How is a tax loss computed?

Answer 1

In exactly the same way as a taxable profit

Question 2

What is the loss in calculating a loss?

Answer 2

THe negative adjusted figure after capital allowances for an accounting period

Question 3

If there is a loss in an assessable period?

Answer 3

The taxable trade profits for tax year based on that assessable period are nil. Never put in a negative assessment

Question 4

What is taxpayer able to claim when relieving the loss?

Answer 4

Claim relief for the loss by setting it against income in accordance with legislation

Question 5

What is involved in relieving the loss?

Answer 5

Deducting the loss from either total income, chargeable gains, or future trading income, depending on which form of loss relief is used

Question 6

When may a claim be made by a taxpayer?

Answer 6

To offset a trading loss against their general income

Question 7

What is the loss available for relief?

Answer 7

The loss in the assessable period for that tax year

Question 8

Loss relief is against total income of?

Answer 8

Tax year in which loss was suffered

Preceding tax year

Question 9

If claims against both current and prior year income are made?

Answer 9

The taxpayer can specify in which order the loss is used

Question 10

What happens to the loss relief against total income

Answer 10

Loss is offset against non-savings income as far as possible, then ahainst savings income and finally dividends

Question 11

What if a claim is made?

Answer 11

Maximum possible loss must be set off

Question 12

When must a claim for a loss be made?

Answer 12

By 31 January which is 22 months after end of the tax year of the loss.

Question 13

Loss is made in 2023/24?

Answer 13

By 31 January 2026

Question 14

Can relief be claimed against general income

Answer 14

No

Question 15

Circumstance where relief can be claimed against general income?

Answer 15

Loss-making business is conducted on a commercial basis with a view to the realisation of profits throughout assessable period for tax year

Question 16

If loss relief is claimed against total income. What is the maximum that can be relieved

Answer 16

Higher of £50000 or 25% of person’s total income

Question 17

How is the cap on income tax relief applied?

Answer 17

Separately to the total income for each year for which relief is claimed

Question 18

When does the restriction not apply for income tax relief?

Answer 18

Where a loss is relieved against profits of the same trade for the preceding tax year

Question 19

Where does the restriction apply for income tax relief?

Answer 19

Offset of losses against other income in that year

Question 20

What if no claim is made to set loss against total income or some of loss is left after such a claim?

Answer 20

Balance will be carried forward indefinitely

Question 21

How is a carried forward loss relieved?

Answer 21

Against first available future profits from the same trade

Question 22

What is set-off?

Answer 22

Automatic and compulsory

Question 23

When must a claim be made?

Answer 23

To establish the amount of loss carried forward within 4 years of end of tax year in which loss arose

Question 24

What if a claim is made against total income?

Answer 24

Taxpayer can make a further claim to offset any remaining loss against chargeable gains for the year

Question 25

When must offset be made?

Answer 25

Against total income in that year first