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Dear Tutor,
I have read that it can be advantageous to make a claim to reduce capital allowance for a period rather than carrying forward a loss.
When does it make a difference? If I dont reduce my capital allowance, I will have a loss to carry forward against future trading profit. If I do reduce my capital allowance, I will have greater capital allowances to claim in the future. So why is it advantageous to make a claim to reduce capital allowances?
Thank you.
If you carry forward the loss then it must be used against the next available future trading profit. If that next profit is £20,000 and is the only income of the taxpayer and the current loss to carry forward with capital allowances is £20,000 which includes a capital allowance claim of £10,000 then you tell me whether it would be sensible to claim the capital allowance – think about the personal allowance!
Thank you, I am thinking about this.
In the case of a company, therefore, is it advisable to claim just enough capital allowances to create a loss that will cover this years TTP, while not wasting qualifying charitable donations, so in effect be able to bring TTP down to 0 or down to the lower tax band for corporation tax?
I could even claim enough capital allowance to create enough loss to carry back if it reduces the previous years rate band to the lower rate? In this case I suppose I would lose this years qualifying charitable donation. So I would have to decide how valuable that is to me now.
Is this the right line of thinking?
Yes absolutely right – you may restrict the capital allowance claim in order to not waste the personal allowance for the individual or the qualifying charitable donations for a company or to get just the right amount of loss to relieve profits taxed at higher rates.
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