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
Ask the Tutor ACCA TX-UK
question on election of loss
OT notes - chapter 7 section 4 d (specifically part (iv)
what is the name of the question
why dont we restrict amount of capital losses b/f
and why is capital losses b/f offset before offsetting trading losses
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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