LOSS RELIEF AGAINST INCOME & CAPITAL GAINS

IIbrahim10y ago

sibly had the following results for 14/15 loss available for relief against general income 27,000. Income 19,500 capital gains less current year capital losses 15,000 annual exempt amount 11,000 capital losses brought forward 9,000 show the loss that would be relieved against income and gains my answer income 19,500 loss relief against general income (19,500) net income 0 capital gains 15,000 less remaining loss (7,500) bal. 7,500 annual exempt amount restricted (7,500). capital loss of 9,000 is carried forward. please, is my answer correct?

TTTax Tutor10y ago#1

This problem is as tricky as it can be in this area as it has involved capital losses b/f. To begin with it is correct to apply the loss against the total income of the tax year leaving 7,500 (27,000 - 19,500) loss available to be treated as a capital loss of that tax year and the relief does apply before the deduction of capital losses b/f and the AEA. However there is a maximum loss that may be used in this relief computed as the net gains of the year (15,000) LESS any capital losses b/f (9,000) equals 6,000. Therefore the gains calculation would show net gains of year 15,000 less 6,000 (max loss claim) leaving 9,000. As this is below the level of the AEA then as in your answer none of the capital loss b/f will be used and will therefore be c/f and no CGT will be payable. The only difference to your answer is that there would still be 1,500 of the trading loss to use in a separate income tax loss relief claim as of the 7,500 loss available to be used against gains, the max claim allowed was only 6,000, thus leaving 1500. It is a small technical point which so as to keep the notes as user friendly as possible I did not even put into our OT study notes! Hope this explains