I have been passed a new client's 2010 SA100, where a Section 64 loss claim was set against pension income received in the year. However, only a small amount of the 2019/2010 trading loss was claimed, in order to utilise the full personal allowance. There is no loss to be carried back. Can you confirm, as I understand it, that this is incorrect and that it is an 'all or nothing claim', and that carrying forward the remainder of the loss, under Section 83, is also incorrect?
Many thanks.
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Pretty much so
I think you can pick the income to offset but once you have, if the loss is > the income, it's extinguished regardless of personal allowance etc. Remember you can offset the loss against the other income of the same year and/or the year before, but you have to elect which year gets the first hit if going for both.
Only once the income has been extinguished can you c/fwd any surplus loss under S83.
Depending on the circumstances, when this sort of thing has happened to me in the past, I've pointed out the mistake to the previous accountant and got them to correct the tax return free of charge. This keeps the client happy and also means that if there's any come back, you are not lumbered. I would certainly feel OK about doing this if I'd cocked up.
Agreed
Any balance of loss is only available to carry forward if all the income has been covered, regardless of personal allowances (or any other reliefs)
Stating the obvious here
Remember that if the loss includes a capital allowances claim, you could restrict the CA's so that the loss is reduced to the desired amount, thus avoiding wasting the excess loss. Of course there would be no losses then to carry back or forward.