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Carol ceased trading on 30 September 2018.
Her recent tax adjusted trading profits/(losses) have been:
Year ended 31 January 2018 £39,000
Period ended 30 September 2018 (£24,000)
Carol had unused overlap profits from the commencement of trade of £12,000.
What is the amount of terminal loss available to Carol?Hello, please help with this question. Even after reading the lecture and the answer, I really don’t understand how the answer is calculated?? The answer says its £30 000
Terminal loss £ £
6 April before cessation to date of cessation
6.4.18 – 30.9.18 (£24,000 × 6/8) 18,000
12 months before cessation to 5 April before cessation
1.2.18 – 5.4.18 (£24,000 × 2/8) 6,000
1.10.17 – 31.1.18 (£39,000 × 4/12) (13,000)
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Profit – ignore (7,000) 0
Plus: Overlap profits 12,000
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Terminal loss 30,000I don’t understand why we are adding the overlap profits, and also how is that profit calculated? why is it a negative amount when calculating the profit for 39000 yet it is a positive amount when taking the loss of 24 000? Soo confused. please help as I don’t understand how the dates are working in this
Have you actually worked through the OT Notes – chapter 7 section 6 page 47 and watched the lecture?
Hello yes I did. I understand that for terminal loss we can have the loss relief of 36 months on a LIFO basis, and I’ve done hundreds of other questions. This one is one of the ones I can’t seem to understand. I think I need elaboration because I may be overcomplicating it in my head? please explain?
Sorry but you clearly have not read / understood the note that I referred you to above – specifically chapter 7 section 6 (b) page 47
Note (b) (i) in the calculation of the terminal loss states:
“The actual trade loss for the tax year of cessation (from 6 April to the date of cessation) PLUS any OVERLAP RELIEF arising from opening years.”
and the last line of the note states:
“If the RESULT in i) or ii) is a PROFIT, it is treated as ZERO for purposes of the terminal loss computation”
These are the 2 issues you have queried!
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