CH 14 - Relief for Trading Losses

Question 1

What company can do with losses (state leg. ref.)

Answer 1

• Carry the loss forward (CTA 2010, s.45A(6))
• offset against total profits of the same accounting period (CTA 2010, s.37(3)(a))
• Carry back against total profits of the previous 12 months (CTA 2010, s.37(3)(b))

Total profits means income and gains before deducting qualifying charitable donations.

Question 2

What loss claims got restricted partial claims under CTA2010?

(which claims are ‘all or nothing’)

Answer 2

Both are ‘all or nothing’:
* carried back (CTA 2010, s.37(3) (b))
* current year (CTA2010,s37(3) (a))

Question 3

What is the time limit for
* carried back (CTA 2010, s.37(3) (b))
* current year (CTA2010,s37(3) (a))

Answer 3

2 years from end of the loss-making accounting period

Question 4

What restriction applies to
(CTA 2010, s.45A(6))

condition & possible disclosures

Answer 4

The max b/fwd losses that can be reliefed is lower of;
- c/fwd unrelieved losses, &
- the deductions allowance (£5m) + 50% × (unrelieved profits – deductions allowance).

A company must specify the amount of its deductions allowance in its corporation tax return;
&
must also specify the allocation of the deductions allowance between different types of profits (if the loss carried forward can only be used against certain kinds of profits)

£5 million for a single company for a 12-month accounting period (reduced for short accounting periods).
Unrelieved profits = total profits after current year loss relief.

Question 5

What a company do to claim (CTA 2010, s.45A(6))?

one condition

Answer 5

The company must continue to trade in the accounting period in which the relief is to be given

Question 6

How Terminal loss Relief can be claimed?

Answer 6

the trading loss of the final 12 months of trade can be carried back
against total profits of the 36 months ending immediately before the loss- making period rather than the normal 12 months.

Question 7

What is considered a terminal loss relief, if the penultimate accounting period of trade is also loss making

for final acc. period of trade with less than 12mts long

Answer 7

Then a proportion of this loss is also a terminal loss and can be carried back against the total profits of the 36 months ending immediately before this loss-making period.