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Sir i dont understand one question in kaplan revision kit
Norma who had been in business since 1 may 2012 , disposed business and retired on 31st May 2016 . She does not intend to start any other business but will be employed part time from june 1 2016 on an annual salary of $11400
Her trading profits losses as adjusted for taxation were :
period ended 31-12-12 21000 profit
Year ended 31-12-13 17000 profit
Year ended 31-12-14 16900 profit
Year ended 31-12-15 8835 profit
period ended 31-5-16 (11000) lossesNorma has received interest of 24oo each year since april2012. in addition she realised a taxable gain of $ 35000 (after annual exempt amount) in june 2015
sir what all loss reliefs are available now
If you cannot answer this question nor understand the model answer, then you first need to go back to the OT course notes and lectures dealing with the bases of assessment in opening and closing years and then the chapter on losses – the reliefs available will include set off against total income of current and / or preceding tax year and terminal loss relief
sir what is the trading loss of 15250 is set of against chargeable gains then taxable income
sir actually i dont understand answer for this in kaplan sir pls help me out with this question
From the questions you are asking I would repeat my advice – have you listened and worked through the OT lectures?
Loss relief cannot be claimed against chargeable gains before setting it off against total income! The extension claim against gains can ONLY be made after firstly claiming against the total income of the year!
You need to work the assessments in opening years to establish the overlap profit to add into your loss and also to understand that terminal loss relief requires a separate calculation.
I do not have the Kaplan material so cannot assist with that but it again appears to me that you are trying to answer some challenging questions but without firstly gaining the knowledge to allow you to do that.sir i have calculated the trading loss it is 15250 ie ( 11000loss + 4250 OVER LAP)
and terminal loss is 10096
sir in institute teacher claimed relief against chargeable gains ie she got 46100 of chargeable gains and used trading loss against it but in kaplan they got relief from total income than chargeable gain but in chargeable gain here again they used 35000-31765 here 31765 is benefit in the band of 32000 so coming to 35000-31765 its 3235
so after utilising 11235 income of 15/16 against loss of 15250 the remaining loss of 4215 was used against 3235sir thats y am confused . Two answers are conflicting
Firstly adnan you should be asking your tutor to explain the answer.
Your tutor is correctly stating that the loss remaining AFTER set off against the total income (15,250 – 11,235 = 4,015 (not your figure above!)) will be set off against the gains before deduction of the AEA (46,100).
However, Kaplan are answering the question actually asked (having now being sent a copy of the question to see) which is to calculate the effect on the taxpayer’s tax liability which means computing the tax saving arising from the use of the loss – this means comparing what were her tax liabilities before the loss claim with her liabilities after the loss claim.
If your tutor went on to show that tax saving then both answers should show the same overall tax saving and both would be correct!
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