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Hello,
Many thanks for the highly informative videos.Could you please state the two requirements which must
be met if a company wishes to claim relief for its trading loss.I’m confused as to whether or not it is that the loss has to be used firstly in the current period and no partial claims. But there is partial claim for carry forward and the question didn’t specify what type of loss relief. So I think the examiner means loss relief in general. Are there some other requirements that I am missing?
Thanks
I assume from what you say that you have therefore read the OT notes and watched the lectures on corporate tax losses – I copy below the essential rules from the OT Notes (Chapter 18 section 1.1, page 101)
“The loss may then be relieved in the current period against Total Profits, FOLLOWED by a 12 month carry back to an earlier period(s) against Total Profits AND / OR by carry forward to relieve against ANY part of future total profits.”
“Note that if a company wishes to carry back a loss then it MUST firstly use the loss in the current period and unlike with the carry forward claim, partial claims are NOT allowed in either the current period or carry back
claim.”So when a trading loss arises in a chargeable accounting period the company may simply choose to carry forward that loss to set off against any part of future Total Profits.
If, as is more likely in a question the company wishes to use that loss at the earliest available opportunity then it must firstly make a current period claim against Total Profits and it may THEN choose to carry back the remaining loss against the Total Profits of the preceding 12 months. In both the current period and carry back claims NO partial relief is available and the loss must therefore be set off against ALL of those Total Profits.
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