Lecture 8

Question 1

New and updated lecture 8: part 1
1. What is trading loss?

2. What is carry forward the loss example : in 2023, your company lost 100,000 and in 2024 you make profit of 70,000 what do you do
3. 2 types of carry forward : before 1 April 2017 and after 1 April 2017?
4. Use loss in the same year? E.g the same year you had made a loss 20,000 and then you made a profit of 15,000 what do you do?
5. What is carry the loss back? ( up to 1 year )? E.g 2024, you made lost of 80,000 and 2023 you made a profit of 60,000? What do you do

Answer 1

1. Trading loss is when a compnay spends more money than it earns from a normal business
2. Carry forward : you save the loss and use it future. In this example : 70,000 of profit is 0 tax and you still have 30,000 to use in the future
3. Before April 1 2017 you can only do it from the same company like it has to be used from the same business for e.g you closed down that business and open car business you can’t use your carry forward so that 30,000 can’t be used. After 1 April 2017, you were allowed to use it any business
4. Loss in same year. You can only use your profits within the year. So you don’t need to pay tax on 15,000 as you can use that loss.
5. Carry the loss back up to 1 year = if you made profits last year you can go back in time and apply the loss to that year and get tax refund. For e.g 80-60 you pay 0 tax on 60,000 and then you still have 20,000 left to use within 2 YEARS!

Question 2

Part 2
1. What is terminal loss? E.g bakery shutting down 2024 with a loss of 90,000 ?
2. What about gift aid donations? E.g if train loss is 30,00 and got rental profit of 5,000 and gift aid donations of 5,000 what do you do?
3. Anti avoidance rule : what if someone buys a company with losses then changes the coronary from bakery to tech can ythey use old losses to reduce new business tax?

4. What about non trading losses? How can they reduce their losses if it was:
   - property lossses
   - loan relationship deficits
   - intgangible assets
   - capital losses
5. What about restriction for big companies after April 2017

Answer 2

1. Terminal loss = if company is closing down forever you can carry loss back up to 3 years. You can go back to your profits made in 2023,2022,2021 to reduce your tax 90,000 and get tax refunds
2. Gift aid donations = you can use that to reduce your tax WITHIN THE SAME YEAR. You can’t use it next year. If there is no profits the donation is wasted so it better you wait. If you do 30,000 - 5,000 rental profit = you have 0 profit left. You always minus the gift donation after if you have profit left. In this case, there is no profit left so it a waste. EVEN IF YOU HAVE PROFIT LEFT BUT IT DOESNT CANCEL THE GIFT DONATION OUT IT IS A WASTE.
3. NO THEY CAN NOT.
4. Property losses = they can use total profits but if usnued carry forward to next year
   Loan relationship deficits = use total profits or any similar income if unused carry forward
   Intangible = use total profits within that year
   Capital losses = only can use capital gains to reduce losses they can’t used anything else if anything less carry forward to future gains.
5. Restriction = if they make lots of profits they can use first 5 million use as much losses after that you can reduce 50% of profits with losses.