Cessation of trade capital gain vs trading losses b/fwd

Cessation of trade capital gain vs trading...

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A company which owns nightclub sells nightclub (according to Revenue cessation of trade)with capital gain of £360K, trading losses in final accounting period of £214K and trading losses brought forward from previous years of £133K.

The company has nbot traded since. Is the £133K of losses brought forward useless, not able to be utilized? It seems unfair that the company that really has only made losses throughout its existence should be penalized and have to pay tax in its final year and still have these useless losses brought forward?

Is there any way in which these losses brought forward can be used to reduce the final corporation tax bill?
Laurie Duffy

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By laurie99dy
10th Aug 2004 16:13

Thanks for your replies
Thanks for your help.

Unfortunately the final tax year is 2000 (revenue enquiry not quite finished yet, also company filed late, previous accountant did not file accounts or do any accounts for some reason, last capital allowances were claimed in 1998 and 1999, therefore too late to change.

Anybody got any other ideas?

I don't want my client to have to pay the Revenue a large sum of tax when the reality is that including losses brought forward it is more or less a break even situation.

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By Dogracer
07th Aug 2004 00:39

Dont Think you can use losses
In my view trading losses brought forward can only be set against future trading profits. Trading losses in the final accounting period can be offset against Chareable Gains.

Sorry cannot be more helpful

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By mjswebster
08th Aug 2004 10:05

Disclaim Capital Allowances

Agree with Andrew, you can't use losses b/f against the capital gain. However, if you haven't already done so, you may want to consider disclaiming capital allowances for earlier periods which are still within the time limit for amending the returns.

This will reduce the losses b/f, and increase the loss in the final period by increasing the balancing allowance (or reducing the balancing charge). The increased loss in the final period can then be offset against the capital gain, as long as they fall in the same CT accounting period.

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By User deleted
08th Aug 2004 18:06

Why is there a capital gain?
Are you sure that none of the gain does not arise in respect of clawed back capital allowances, or previously disallowed capital expenditure lost from the tax records[this happens more often than you might think]If you have them, go back over the tax comps. for all the years you can find to try to identify disallowed items.

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