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Tax Insider Tip: Timing Disposals To Make Maximum Use Of Capital Losses: Companies

14th Feb 2014
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Capital losses can only be set against capital gains. A capital loss made by a company cannot be taken into account in computing the trading profit or loss.
 
A capital loss is set against capital gains of the same accounting period and, to the extent that it is not fully offset, it is carried forward for relief against future capital gains. Capital losses cannot be carried back so the timing of disposals can be important to prevent capital losses from remaining unrelieved. 
 
Example:
JKL Ltd has a year end of 30 September.
 
In May 2013 it realises a capital gain of £25,000.
 
It is planning on making a further disposal which is expected to realise a loss of £15,000. If the loss is realised before 30 September 2013 it can be set against the gain of £25,000 arising in the same accounting period.
 
However, if the disposal is delayed until 1 October 2013 or later, relief will be contingent on making a further capital gain to mop up the loss.
Realising the loss before the end of the accounting period provides immediate relief and saves corporation tax of £3,000 for that year.
 

This is a sample tip taken from our 136 page guide:
101 Ultimate Tax Strategies Revealed.

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