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TRADING LOSS

This topic has 1 reply, 2 voices, and was last updated 5 months ago by Tax Tutor.

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January 14, 2022 at 2:06 pm #646040
ShahlaVajida16
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Joyce started in business as a sole trader on 1 january 2020 and prepared her first set of accounts to 30 september 2020 and her second set of accounts to 30 september 2021. she made the following losses in her first two periods of trading:
p/e 30 sep 2020 (9000)
y/e 30 sep 2021 (14400)

match the amounts of the trading loss with the tax years.

ANSWER:

Actual basis 1.1.20 to 5.4.20
£9000*3/9 3000

2020/21 first 12 months 1.1.20 to 31.12.20
£9000-30000 6000
£14400*3/12 3600
=9600

Why in 2020/21 14400*3/12?

Isn’t a tax year from 06.04.2020 to 05.04.2021
so it should be (9000-3000)=6000 and 14400*6/12 ( from 30.sep 2020 to 05.04.2021)

i cant understand why they divided 14400 with 3/12.
January 14, 2022 at 4:18 pm #646060
Tax Tutor
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You have already correctly written that the basis of assessment in the 2nd tax year – 20/21 – is the first 12 months of trading and written the dates for that basis period – only 3/12 of the second loss making period fall into that basis period!
Once again – have you worked through the lectures and study notes provided?
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