i have to do a terminal loss calculation for a ceasing partnership. its made a loss in final AP but was mostly profit-making in previous years. no idea how to do this, I havent done one before. anyone have a link to best summary of rules and how best to use the loss? thanks. year end is 31 Jan, and final AP was 31.1.12 if that matters.
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Look at all possible loss reliefs
Before you start thinking about loss relief you need to establish the amount of loss as adjusted for tax purposes to be allocated to each partner. Each of the partners can then make loss relief claims as appropriate to the individual. You will need to look at each of the loss reliefs available - i.e in year/carry back or terminal loss relief and see what works best for the partner concerned. Terminal losses for a year ending 31 January 2012 will need to be apportioned between 2011/12 and 2011/11. If the individual partner has paid higher rate tax in any of the years 2007/8 to 2010/11 then you need to be either looking at the carry back relief or terminal loss relief, but watch the interaction with gift aid, higher rate pension relief etc as they can be displaced by losses carried back. Also watch the class 4 NI situation with carry back losses. At the end of the day it is about crunching the numbers for the various loss relief scenarios and finding the optimal solution for each partner.
Good luck
thanks for that - its a
thanks for that - its a husband and wife and i dont think they have any other income bar maybe state pension, though they may well have deferred receiving that. they did have rental income but their son has received that now for at least 3 years so that wont be relevant. certainly not higher rate payers. i shall endeavour to tackle it now i have an idea of where to start.
thanks again :)
Ok, I've calculated the allowable loss and it needs to go against one partner's income for 2010/11, all nice and simple, he paid tax at basic rate for all relevant years wherears other smaller-% partner paid little or nil, so just needs to go back LIFO-fashion.
i dont know what box this carried back loss figure should be entered into on the 10/11 return for re-submission. lots of boxes for current losses and losses b/f, but what box do you put a c/b loss in?
Don't need to amend 2010/11
You don't amend 2010/11. In the 2011/12 return enter the amount of loss to be carried back on the partnership pages. Calculate the amount of tax refund generated by the loss carry back and enter that in box 14 of TC2. You then need to put an explanation in the "whitespace" stating what the entry relates to. This should bring up a freestanding credit for the loss carry back relief against the tax due for 2011/12.
Hope that helps