Trying to get my head around the rules for a client that refuses to align company year-ends. Not an exam question, but I'll use round numbers to keep it as simple as I can.
A had losses to 31/03/19 which it carried back. B had losses of £100k to 31/12/18 which it has carried forward. A has profits of £500k to 31/03/20 and B trivial loss to 31/12/19, so I'll ignore that.
I tried to read the legislation, but gave up and turned to HMRC's guidance. Knowing that we can't always rely on it, my understanding is that B can surrender only £75k of its b/fwd loss (it is effectively treated as a loss of the surrender period so the usual overlapping period calculation needs to be carried out).
The remaining £25k would then be carried forward as a further carried forward loss into B's period to 31/12/20. This is where I start to get lost. Presumably A could make a further claim for its 31/03/20 period, but only for 25% of £25k. The balance would then be claimed (assuming profits) by A in its period to 31/03/21?
TIA
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If client refuses to align dates then he deserves the extra fees
Align dates is Qu 101 on this stuff.
I have nothing with dates out of line
The rules seem to treat the loss carried forward as a loss of the AP into which it is brought into, so your assumptions seem correct.
If you know B's profits to Dec 2020 it will perhaps make more sense.
If B makes a profit to Dec 2020 the balance of the unrelieved loss from Dec 2019 (itself being a loss from 2018) may be absorbed in B against the profits in that AP, so group relief to A would not be in point.
However if B makes a loss in the period to Dec 2020 the group relief for the period would allow some or all of the £25k to be relieved against A's remaining profits for the year to March 2020. The exact amount will be 25% of the result for B for the year to Dec 2020, including the £25k brought forward loss.
I think! Bit late for this maths!
Might be worth sticking it in the software and seeing if it agrees!
Rather than splash out, why not use an excel schedule - it’s what I’ve done for my 2 sets of group clients.
Ah but ... you need to know the rules otherwise your Excel schedule could be a waste of effort.
True ... but creating the spreadsheet helped me understand the rules.