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Tax Tutor.
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Kyaw
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The following question is from BPP Kit, but i do not sure about their answer. Please, help me, Sir!
Joyce started in business as a sole trader on 1 january 2014 and prepared her first set of accounts to 30 september 2014 and her second set of accounts to 30 september 2015. She made the following losses in her first two periods of trading;
p/e september 2014…………………(9000)
y/e september 2015………………..(14400)What are the trading losses of the tax years 2013/14 and 2014/15?
Their model answer as following.
2013/14 Actual basis 1.1.14 to 5.4.14(9000×3/9)………………….=3000
2014/15 First 12 months 1.1.14 to 31.12.14.(9000-3000) + 14400×3/12 = 9600…
I do not understand why they subtract 3000 from 9000 for 2014/15.
unstopabl3
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Trading profits can be overlapped and we write the overlap in the margin.
However, losses are not to be overlapped, that’s why for 14/15 only those losses which have not been already used in 13/14 are taken which is 9000-3000.
The answer by BPP is correct.
We will not allow the losses to overlap again in 15-16 and will do 14400-3600 to get 10800 loss for 15-16.
Hope that you understand.
Tax Tutor
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As stated above there is no concept of an overlap loss. A loss may only be used once and hence if a loss falls into more than one basis period it is allocated to the first tax year into which it falls and may not be used again in the subsequent tax year into which it also falls as correctly noted by unstopabl3
ShahlaVajida16
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why did they divide 14400*3/12 ?
loss is calculated on tax year so it should be from sep.30.15 to 05.04.21
so shouldn’t it be 14400*6/12?Tax Tutor
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Look at answer to previous ask the tutor question which deals with the same issue
Kyaw
unstopabl3
Tax Tutor
ShahlaVajida16
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