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.
Ask the Tutor ACCA TX-UK
Claim for reduced capital allowance or Carry forward losses?
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.
Excellent, thank you. And thank you OpenTuition for this fabulous and reliable study support.
Sign in to reply to this topic.