CH 15 - Relief for Other Losses

Question 1

How NTLR deficits can be used?

Answer 1

can be:
- set against total profits in the loss-making accounting period, or
- carried back 12 months and set against non-trading profits (LR).

These claims can be done in any order and can be for any amount; they are not all or nothing claims.

Unused non-trading (LR) deficits are carried forward and set against future total profits.

Question 2

How NT-IFA deficits can be used?

non trading loss on IFA’s

Answer 2

non-trading loss on IFAs can be used as;
* A claim can be made to set the non-trading loss on IFAs against the total profits of the loss- making accounting period
* claim can be for any amount
* must be made within two years of the end of the loss-making accounting period

• Carry back claims are not possible.
• unrelieved IFA losses are carried forward and are treated as IFA losses of the next accounting period

Question 3

How capital losses can be used?

Answer 3

Capital Losses can be;
- set against chargeable gains made in the same accounting period
- Carry back claims are not possible.
- Unrelieved capital losses can only be carried forward against chargeable gains made in future accounting periods. (restriction applies)

Question 4

How management expenses can be used?

Answer 4

Management expenses are;
- set against total profits of the current accounting period.
- relief is automatic and compulsory
- are deducted before qualifying charitable donations and before any loss relief claims

Excess management expenses (when man.exp. exceeds total profits), can be:
- c/fwd and set against future total profits
- c/back is not possible

Question 5

Whats are ‘flexible losses’ ?

Answer 5

Losses that can be set against total profits;
* Trading losses
* Non-trading loan relationship deficits
* UK property business losses
* Non-trading losses on IFAs
* Excess management expenses

Question 6

What needs to be done to claim ‘flexible losses’?

Answer 6

• Relief is not automatic.
• claim can be for any amount (subject to the restriction for brought forward losses)
• must be made within two years of the end of the accounting period in which the relief is to be claimed

As this is not ‘all or nothing’ claim, tax relief can be preserved for qualifying charitable donations paid in a future accounting period.

Question 7

What is other name for ‘b/fwd capital losses’ and why?

Answer 7

‘streamed losses’
can only be set against chargeable gains

restriction applies

Question 8

How arrive at the restriction amount for c/fwd losses?

Answer 8

Max. amount of b/fwd losses (appart overseas property business losses) is the lower of:
- the carried forward unrelieved losses, and
- the deductions allowance plus 50% × (unrelieved profits – deductions allowance).

The deductions allowance = £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

For capital losses brought forward, unrelieved profits = chargeable gains after current year relief.

Question 9

What company must do when claiming c/fwd losses under restriction?

Answer 9

• must specify the amount of its deductions allowance in its corporation tax return

Where b/fwd capital and other type losses exist;
- it must specify how much of its £5m deduction allowance is to be allocated to chargeable gains to effectively increase the amount of relief available for capital losses brought forward.