Business Tax (FA2015) Trading Losses

Transcription

1 Business Tax (FA2015) Trading Losses Louise Brereton 23 November 2016 AAT is a registered charity. No

2 Contents 1 What are trade losses 2 Loss relief options 3 Which loss relief option to chose 4 Questions

3 Trade Losses A negative result in the trading profit computation for the period of account Nil profit is reported on the corporation tax computation Decide which loss relief options to take

4 Loss Relief Options Carry forward Automatic loss relief First available, same trade profits Use as much as possible

5 Loss Relief Options Current year / Prior year Claim must be made Use against Taxable Total Profits (TTP) but before Qualifying Charitable Donations (QCD s) Use as much as possible Current year only or current year then prior year (12 months) Any unrelieved losses carried forward

6 The layout y/e current year y/e prior year y/e future year Loss memo Trade profit Loss b/f Total other income Loss c/y Loss p/y Less QCD s TTP

7 Example 1 Company Ltd would like to carry forward its trading loss of 33,100 from 31 March 2015 to future years. It estimates its future trading profits will be as follows: Year end 31 March ,000 Year end 31 March ,500 Company Ltd has no other income Show how the loss will be utilised NB: c/f against the first available same trade profits

8 Example 1 Trade profit Loss b/f y/e 31/03/2016 y/e 31/03/2017 Loss memo Total other income Loss c/y Loss p/y Less QCD s TTP

9 Example 2 Checkers Ltd has unrelieved trading losses as at the 1 November 2014 of 1,900 and has losses for the year end 31 October 2015 of 14,500. Checkers Ltd wish to carry forward losses and has the following information on future forecasts of trading profits available: Year end 31 October ,000 Year end 31 October ,000 Checkers Ltd also has 2,000 of other income every year and has 500 QCD s every year. Show how Checkers Ltd will use the trade losses available and any unrelieved losses left to carry forward.

10 Example 2 Trade profit Loss b/f y/e 31/10/2016 y/e 31/10/2017 Loss memo Total other income Loss c/y Loss p/y Less QCD s TTP

11 Example 3 JJ Bush Ltd has the following information available regards its trading over the last 4 years: y/e 31 March ,700 y/e 31 March ,500 y/e 31 March ,000 loss y/e 31 March ,300 estimated JJ Bush Ltd has 2,000 other income a year and has 1,000 QCD s every year. JJ Bush Ltd wants to obtain immediate loss relief. Show how the loss will be utilised and any unrelieved trading losses to carry forward at the 31 March 2016

12 y/e 31/03/2014 y/e 31/03/2015 y/e 31/03/2016 Loss memo Trade profit Loss b/f Other income Total income Loss c/y Loss p/y Less QCD s TTP

13 Which relief to choose In the previous example we learnt that losses are only carried back for 12 months. A company can chose which relief they want to use, the reasoning behind it is; Current year / prior year: Immediate loss relief Aids cash flow Carry forward: Tax saving if expecting large profits or tax rates increasing

14 Example 4 Green Acre Ltd has the following results for the last periods of account y/e 31/03/2015 y/e 31/03/2016 Trade profit/(loss) 7,160 (14,900) Gross interest received 5,000 5,000 Gift aid donations 19,000 18,000 It is company policy to act in the most tax efficient way. Using the above information identify how Green Acre Ltd would claim their loss relief.

15 Example 4 How much trading loss can be claimed against income y/e 31 March 2016? How much trade loss can be claimed against income y/e 31 March 2015? How much trade loss can be carried forward to y/e 31 March 2017? How much gift aid can be carried forward to y/e 31 March 2017?

16 Workings slide

17 Example 5 Amber Ltd has the following results for the last periods of account y/e 31/03/2015 y/e 31/03/2016 Trade profit/(loss) 7,160 (14,900) Gross interest received 5,000 3,000 Gift aid donations 1, Capital gain/(loss) (4,000) 1,000 It is company policy to take immediate relief for losses. Using the above information identify how Amber Ltd would claim their loss relief.

18 How much trading loss can be claimed against income y/e 31 March 2016? How much trade loss can be claimed against income y/e 31 March 2015? How much trade loss can be carried forward to y/e 31 March 2017? How much gift aid can be carried forward to y/e 31 March 2017? How much capital loss can be carried forward to y/e 31 March 2016?

19 Workings slide

20 Questions

21 Thank you Association of Accounting Technicians 140 Aldersgate Street London EC1A 4HY