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Excuse me can anyone explain the cashflow advantage on topic number 4 : Relief against total Income from the video Tax Adjusted Trading Loss Reliefs ? i couldnt understand the repayment of last years tax.? how are we receiving a repayment of last years tax ?
Thankyou.
Based on last year’s taxable income the taxpayer will already have paid the amount of tax payable. The loss relief allows the taxpayer to now reduce the total income and with it the taxable income of that preceding tax year resulting in a lower tax payable figure, hence the original tax figure paid was too much so the taxpayer will now be entitled to a repayment of the difference.
In cash flow terms an immediate repayment of tax is better than a reduction in this year’s tax, which is still to be paid, which in turn is better than carrying forward a loss which will reduce a future year’s tax liability
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