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question on election of loss

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › question on election of loss

  • This topic has 4 replies, 2 voices, and was last updated 8 years ago by Tax Tutor.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • February 18, 2017 at 8:04 am #372998
    Jean96
    Member
    • Topics: 77
    • Replies: 67
    • ☆☆

    sally has been trading as a sole trader for many years. in the year ended 31 july 2015 she made a trading loss of £45000

    sally’s only other source of income is property income of £8000 each tax year

    in the tax year 2015/16 sally realised a chargeable gain of £32000 on the sale of a necklace
    and a capital loss of £4000 on the sale of a painting she has capital losses brought forward of £18000

    what is the amount of trading loss that sally can offset against her chargeable gains in 2015/16

    WHY DO WE DO THIS ELECTION

    ANS lower of remaining trading loss following current year claim against total income
    (£45000-£8000) £37000

    or current year chargeable gains 32000
    less cy capital losses (4000)
    less capital losses b/f (18000)
    available loss 10000

    February 19, 2017 at 1:44 am #373079
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    OT notes – chapter 7 section 4 d (specifically part (iv)

    February 19, 2017 at 8:44 am #373106
    Jean96
    Member
    • Topics: 77
    • Replies: 67
    • ☆☆

    what is the name of the question

    February 19, 2017 at 9:18 am #373112
    Jean96
    Member
    • Topics: 77
    • Replies: 67
    • ☆☆

    why dont we restrict amount of capital losses b/f
    and why is capital losses b/f offset before offsetting trading losses

    February 20, 2017 at 1:00 am #373224
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    As per the OT course note referenced above:
    “The MAXIMUM loss available for use in this relief is computed as the net gains of the tax year LESS any capital losses brought forward”
    This is the calculation done that you quote (10,000) which is lower than the loss available after the current year claim (37,000)
    This is simply the calculation of the loss available for this relief NOT the calculation of the net gains chargeable where in that capital gains working you only use capital losses b/f to the extent of gains in excess of the AEA
    That calculation here would show:
    Net gains of year (28,000) less trading loss used as capital loss (max 10,000) equals 18,000 less capital losses b/f (max 6,900 so as to bring down the net gains of year to the AEA of year 11,100)

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