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Sir,
If an individual has a trading loss so he has to adjust that firstly in the current and then the previous 12 months. We do not consider whether PA is saved or not. Am I correct?
Secondly, Even if we for example have a trading loss for a year and also property Income of 6000 so even If we set a 6000 loss in current year and then carrying back 12 months that would not save the PA either as the property income was already less then the PA. So why do we choose an option of not setting off the loss in current tax year first. It’s actually one of the question from your practice questions of OT notes. (Quoting) it’s Question No 17.When an individual incurs a trading loss it may be relieved against the Total Income of the current tax year and / OR the preceding tax year. It does not have to be used against the current tax year first and would not be so used if the total income was already less than the PA.
Dear tutor Sir,
For individuals it is not necessary to claim loss relief against current year total income, before its is claimed against previous year income, but is it so in the case of a company? Is there any difference?
Regards and thanks in advance.Yes there is a very important difference – a company MUST use its loss firstly in the current CAP before then being allowed to carry back to the preceding CAP.
Thanks a lot for clearing the doubt. For individual there is an option to carry back the loss without first setting off against current year total income, whereas companies first have to set off trading loss against other income like income from property, interest etc.
Now one more doubt arises, that in case there is also a chargeable gain, can that be kept separate and the set off of trading loss restricted to current year taxable income other than capital gains, before it can be carried back to previous 12 months?
Thanks again. I presume for Individuals there is the option already to carry back trading loss to previous year, without first setting it off against current year profit from other sources including capital gains.
The doubt is only for corporations, since the tax rate is same for all income and the rule book is first you set off trading loss against income from other sources. So my doubt was in case you have only trading loss and no other income other than capital gain, can you carry back the loss without claim relief against the chargeable gain? Additionally can you claim the qualifying donation against the chargeable gain and carry back the loss to previous year’s trading profit?
Exam is just near and looking forward to your reply.
RegardsFor CT the loss relief rule is NOT that you set off against income from other sources – the set off is against TOTAL PROFITS which includes gains! This is clearly stated on page 111 of OT notes – Chapter 18 section 2
Sir,
I am a bit confuse still. In what situations do we have to set loss against preceding tax year rather than current year. As for Individual losses we are not bound to set off loss first in current and then preceding tax year. So in which case should we set against preceding rather than current.In CT if a company WANTS to carry back a loss then it MUST firstly set off against total profits of the current period.
In income tax for an unincorporated trader then the individual may CHOOSE to set off against the total income of the current tax year AND / OR the preceding tax year, If therefore the individual ONLY wants to relieve the loss in the preceding tax year then just that claim may be made.Thanks to Tax Tutor sir, for all the help and guidance.
Wishing all the best for those who are going to appear for exam tomorrow.
Krishnan
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