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This comes from BPP Revision Kit Question 14 – Samantha Fabrique.
The question asked to relieve the trading loss “on the most favourable basis. I basically try to use the loss and save the personal allowance so that I would use just enough of the loss to leave 6475 which would go against the P.A. . My question is, if I apply the loss in the years and way as the answer but use less or more of the loss is my answer considered wrong?
Also, when they say to use it in the most favourable way is it that we are trying to use up as much of the loss as possible in the preceding and following years to get earlier tax relief?
Hope my query is not confusing.
Thanks for any help u can offer.Hiya
If you decide to use a trading loss against total income you cannot preserve the PA. If the loss is big enough you must wipe out all the income. Yes the most favourable way can mean carryback so a repayment but also you must consider saving at the highest tax rate
Hope this helpsYou may be referring to either the new rule that relief against total income in current and/or preceding tax year is restricted to the higher of:
(1) £50,000, or
(2) 25% of Adjusted Total IncomeOr you may be referring to the fact from the original question here that partial loss reliefs, only using some of the loss against some of the income are not allowed. You cannot restrict a loss relief to for example preserve the use of the personal allowance.
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