Losses

Where claimant carried on business in non-active capacity what is loss restriction?

The lower of:

Contribution to partnership in early tax years

Overall cap of £25k

Max loss which can be set against non-trade income in a year?

Greater of £50k or 25% of ATI

When must carried forward losses against profits of same trade be claimed by?

within 4 years from end of TY of loss

how can losses in first 4 years of a trade be used?

Carried back against general income of 3 years preceding tax years on a FIFO basis.

Can you offset chargeable gains using trading losses?

Yes - there is no cap either.

The claim must be made though after all available reliefs for using the loss against general income for the year.

3 ways of loss relief for partnership

CY/PY loss relief

Early trade loss relief

CF loss relief

what does a significant time working as a partner mean?

defined as an average of at least 10 hours per week

when is trade loss relief against general income only available?

if the trade is ‘commercial’ - with a view to generating profit

for early trade loss relief CB, is this taken off before or after PA?

Before

Can losses under s.72 be used against capital gains?

No

how do you work out unrelieved partnership contribution?

Capital contributed + undrawn profits

what is the extension of s64 claim?

you can convert excess IT losses into CGT losses

lower of:

trade loss after s64

CY capital gain less CY capital losses

what is a s64 claim?

CY and / or PY claim in any order

it is an all or nothing claim so you could end up wasting your PA

what is a s83 claim

carry losses forward against future profits of the samw trade

applies automatically

What can you do with losses in 1st 4 years of trade? S72

carry back on FIFO - 3 years against net income

This is an all or nothing claim

What is the cap on sideways relief?

s64 and s72 - only offset trade losses against other income HIGHER OF

£50,000 and 25% * Adjusted Total Income

What is s89 loss relief?

terminal loss relief on cessation:

offset on trade profits only for the previous 3 years

On a LIFO basis

It is all or nothing

What are the implications where transfer of trade is a “succession”

The trade losses in Company A will transfer to Company B.

What happens on “succession” if the transfer of trade losses would leave the transferring company in a net liability position?

The losses are restricted by the same amount

what income can TLR offset?

trade income, property income, NTLR

how do charitable donations offset losses?

they cannot make a loss, but they come off income afterwards

What happens to losses that can’t be transferred on succession?

They cannot be relieved under terminal loss rules and will be eliminated.