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Terminal Loss

Interaction with other loss reliefs

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I haven't done a terminal loss relief claim for ages. Maybe 25 years ....

I have a client who has ceased trading owing to a perfect storm of failing health and Covid-19.  The final period shows a loss, including a fair size balancing allowance and overlap relief of £11531.

Profits and income are

Year to 31 Aug 2018         £6308   

Year to 31 Aug 2019        £8362

250 days to 7 May 2020  £11531 loss

He also has pension income of £10500 a year.

I calculate the terminal loss as £11531 less 116 days worth of £8362 (£2657)  or £8874.

My questions are

1. He's lost £11531 and the terminal loss is £8874.  Can he claim the balance of £2657 by sideways relief ?

2. Can he choose what order to claim the losses or is terminal loss a relief of last resort ?

3. Is this calculation right anyway ?

I suspect he's going to lose out somewhere along the line as sideways relief will be against general income. Obviously, terminal losses are restricted to trading profits so they'd suit this case much better.

Thoughts appreciated.

 

Replies (8)

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By Tim Vane
18th Jun 2020 12:56

You should generally try to use terminal loss relief first, then the sideways relief. Any part of the loss not relieved under s89 can be relieved under s64. In each case you have to take all of the remaining loss and allocate to that loss schedule (i.e. you cannot try to optimise each tranche). Don't forget potential overlap relief.

Thanks (1)
RLI
By lionofludesch
18th Jun 2020 13:26

Thanks Tim. Confirms my thoughts and eases my doubts.

My plan would be .....

2019/20

Profits £8362
S89 relief £8362 (part of £8874)

2018/19

Profits £6308
S89 relief £ 512 (rest of £8874)
S64 relief £ 2657 (2019/20 loss brought back to preceding year)

Does that look good ?

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Replying to lionofludesch:
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By Tax Dragon
18th Jun 2020 17:24

Looks good.

Thanks (1)
Scooby
By gainsborough
18th Jun 2020 17:23

Looks good to me. Assume no capital gains anticipated in 2020/21?

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Replying to gainsborough:
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By Tax Dragon
18th Jun 2020 17:25

Ha! Beat me by somewhere between 1 and 119 seconds. Zoinks.

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Replying to Tax Dragon:
Scooby
By gainsborough
18th Jun 2020 17:33

Probably nearer to 119 seconds as, embarrassingly, I still type with 2 fingers :-).

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Replying to gainsborough:
RLI
By lionofludesch
18th Jun 2020 17:51

gainsborough wrote:

Probably nearer to 119 seconds as, embarrassingly, I still type with 2 fingers :-).

Twice as many as me.

Thanks (0)
RLI
By lionofludesch
18th Jun 2020 17:34

Thanks all.

No, no Capital Gains. He's only got his house to sell and that'd be 100% PPR anyway.

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