Individual Tax Adjusted Trading Losses (3)

Question 1

First relief (carry forward)

Answer 1

Carry forward against future trading profits of the same trade

Question 2

Second relief (total income)

Answer 2

Relief against total income of current and/or preceding tax year

Question 3

Third relief (trading loss remain)

Answer 3

If any trading loss remains after relief against total income, taxpayer may choose to extend the loss claim against chargeable gains of that tax year

Question 4

Fourth relief (opening years)

Answer 4

Opening years loss relief against total income of preceding 3 tax years

Question 5

Fifth relief (terminal)

Answer 5

Terminal loss relief against previous 3 years of trading

Question 6

Default position?

Answer 6

The first relief

Question 7

First relief keywords?

Answer 7

Chose to carry forward the loss

Question 8

Second relief methods?

Answer 8

Put loss between current year or previous year

Question 9

Loss in the second relief (maximum possible)?

Answer 9

Must be set off to the maximum possible extent subject to a cap on income tax reliefs (All or nothing claims)

Question 10

Third relief offset lower of?

Answer 10

Loss remaining after income claim

Trading loss set against current year net chargeable gains

Question 11

Fourth relief loss method (all or nothing)?

Answer 11

It is all or nothing

Question 12

Fourth relief loss method (carried back)?

Answer 12

Carried back three tax years on FIFO basis against total income

Question 13

Fourth relief loss method (claim)?

Answer 13

One claim applies to all three years and may generate a refund of income tax

Question 14

Fifth relief loss method?

Answer 14

Final 12 months of trading. On a LIFO basis

Question 15

If question says trading losses will continue for the next few years?

Answer 15

No point carrying it forward

Question 16

Loss in second relief (downside)?

Answer 16

All loss must be put in current year or previous year. Therefore I could lose out on personal allowances

Question 17

A current year claim in the second relief (when is it not beneficial)?

Answer 17

When a l oss is clearly covered by the personal allowance

Question 18

Second relief loss offset higher of?

Answer 18

Current year:
25% of total income OR
£50000

Previous year:
Entitled to relief those losses in the full (deduct trading profit)

Question 19

Third relief offset against gains is the lower of?

Answer 19

Loss remaining after income claim (relevant)

The maximum amount

Question 20

How to calculate maximum amount (third relief)

Answer 20

Total capital gains for year - total capital losses for year - total capital losses b/f

Question 21

If question says starts trading?

Answer 21

Could mean opening years or current years

Question 22

How to calculate relevant amount (third relief)

Answer 22

Total loss - income claim (e.g. property)

Question 23

When total income less than personal allowance?

Answer 23

Not a good idea to do the carry back loss claim here

Question 24

What should we always try to do with the personal allowance in relief?

Answer 24

PRESERVE IT

Question 25

What is more tax efficient for marginal rates of tax?

Answer 25

Offsetting a loss against income of a year where taxpayer is being taxed at higher rate instead of basic rate

Question 26

What is more tax efficient for timing of tax payments/repayments?

Answer 26

Carry back of a loss results in a refund of the relevant amount of income tax already paid