This query relates to both 2 and 5 year averaging claims. Obviously I'm aware of the fact trade losses are treated as nil profits in years where averaging is claimed. My query is - what happens to trade losses that were perhaps offset sideways or carried forward in years where averaging has been claimed? Do you have to re-jig the losses claimed or carried forward because you're effectively giving a 'profit' for that year of loss? Or does the loss claim / carried forward losses just remain as was? This query has only been raised recently at work and I'm struggling to find a proper answer anywhere online etc.
My initial thoughts, and what would make sense and make life easier, is that losses claimed / carried forward get left alone. No need for any amendments. The whole point of averaging is not to change a person's income as such, but to make a more even plateau of tax payments over a period of time. If you look at averaging and when a person claims tax credits, the averaged profit is completely ignored and the actual profit or loss is used for the tax credits claim. It would therefore make sense and make it streamlined if the same outlook was given to losses claimed / carried forward.
The Iris software doesn't make any adjustment to the losses, which I'm hoping is correct!
This would be an utter nightmare if every time an averaging claim is made and there's a year of losses, that amendments are needed for how those losses have been treated.
If someone has any thoughts, it would be greatly appreciated!