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Chapter 10 - Trading Loss - Coggle Diagram
Chapter 10 - Trading Loss
What to do with trading loss?
Assessment
If a basis period has a loss, trading income is nil
Never put a negative assessment
Relieving the loss
Will be claim against income with legislation
Continuing trade
Relief against TI
Loss relief is against total income of current tax year and/or preceding tax year
Set off against non-saving as far as possible, then saving, then dividend income
Maximum loss must be set off (can't save personal allowance)
Cap on income tax relief
If claim against total income, maximum relief is higher of 50,000 pounds and 25% of individual adjusted income (after deducting gross personal pension contributions, not gift aid donations)
Does not apply when relieving for the preceding tax year
Relief against capital gain
Can make further claim to offset any chargeable gains in the year
Offset must be made against total income in that year first
Carry forward loss relief
C/f loss will be relieved against first available future profits
Set off is automatic and compulsory
Loss in the opening year
Early trade loss relief
Enable the loss to carried back 3 tax years on a FIFO basis
Loss is deducted from taxpayer's total income
Terminal loss relief
Relief against trading profit of the tax year of cessation and three preceding years following LIFO basis
Final tax year (1): Unrelieved trading loss from 6/4 to cessation + Overlap profít (if any)
Penultimate tax year (2): Unrelieved trading loss arising 12 months to 6/4 - Profits
Terminal loss relief = (1) + (2)