Unincorporated trader losses

Question 1

What is the trading income in the income tax computation when there is a trading loss

Answer 1

£Nil

Question 2

What are the two options for trading losses

Answer 2

Carry forward loss to offset first available future TRADING profits of same trade
or
Offset loss against total income in CY and/or PY

Question 3

What is the extention claim for trading losses

Answer 3

Offset against capital gains in CY and/or PY

Question 4

For carry forward trading losses, how much of the loss should be offset

Answer 4

All of it - may waste personal allowance

Question 5

For trading loss relief against total income, how much of the loss should be offset

Answer 5

All of it - may waste personal allowance

Question 6

How long does a taxpayer have to claim the relief from trading losseds

Answer 6

12 months from 31 Jan following the end of the tax year in which loss arose

Question 7

What is the restriction around trading loss and non trade hours for relief against other income

Answer 7

Any trader who spends less than 10 hours per week on average running the business there is a restriction

Maximum of £25k per tax year - any remaining losses can be carried forward

Question 8

What is the restriction for all traders on the amount by which loss reliefs can reduce other income

Answer 8

Cap is greater of
£50k
and
25% of adjusted total income in the year (total income + payroll giving - grossed up pension)

Question 9

What is the amount of trading loss that can be offset against capital gains after s64 (CY or PY offset)

Answer 9

Lower of
Loss remaining after s64 claim - relevant amount
Maximum amount (net gain - total capital losses b/f)

Question 10

What is the treatment for trading losses around class 4 NICs

Answer 10

Trading losses offset against non-trading income are always treated as if carried forward against the first available trading income

This reduces future class 4 when there is trading income

Question 11

What is the opening year loss relief against total income

Answer 11

A special loss relief that arises in the first four tax years of trade. A trader may elect to carry back such a loss to the three previous tax years on a FIFO basis against TOTAL income

All or nothing

Question 12

What is terminal loss relief

Answer 12

Relief available for a loss made in final 12 months of trading. A taxpayer may elect to carry back a terminal loss against the trading income of the three preceding tax years on a LIFO basis

Question 13

How do you calculate the loss on which terminal loss relief can be claimed

Answer 13

Trading loss for 6 April before cessation to date of cessation
less
Trading loss for 12 months before cessation to 5 April before cessation

Question 14

What is the loss relief for an ongoing partner

Answer 14

c/f or cy/py

Question 15

What is the loss relief for a new partner

Answer 15

c/f
cy/py
opening years relief

Question 16

What is the loss relief for a leaving partner

Answer 16

cy/py
terminal loss relief

Question 17

What is the restriction on loss relief for partners in LLPs

Answer 17

Partners in LLPs may only claim cy/py and opening years relief up to a maximum of their capital contributions into the partnership

Any remaining losses over that can be carried forward