PTC Question

Esme

I am half way through the practice exam for personal tax.

You are asked to calculate the capital gains tax on 3 assets.

In the information it says 'Albert had unrelieved capital losses of £8,000 at 6 April 2009.' What does this mean and how does it affect the figures?

Thx.

reddwarf

I'd take that to mean the losses can be brought forward and taken off the current year's capital gains tax liability, up to the annual exempt amount, any remaining loss can be carried forward again.

May help..

http://www.hmrc.gov.uk/cgt/possessions/calc-cgt.htm

A-Vic

please correct me if am wrong but you have to use all the losses you cant in personal tax up to personal allowence for s/a but you can in BTC

reddwarf

Using a loss - a step-by-step guide for 2008-09
Step 1 - You must first deduct any allowable losses from gains you’ve made in the same tax year. For example, if you've made both gains and losses in 2008-09, you must deduct those losses from those gains.

Step 2 - If you still have gains after deducting your allowable losses, you should check whether the gains are more than the annual tax-free allowance - known as the Annual Exempt Amount. Nearly everyone who lives in the UK gets this tax-free allowance - it's £9,600 for individuals for 2008-09.

If your gains are below this amount, there's no Capital Gains Tax to pay.

Step 3 - If your gains are more than £9,600 but you've got some unused losses from a previous tax year, you can deduct these from your gains.

Use just enough of the losses to reduce your gain to the Annual Exempt Amount.
Use allowable losses from 1996-97 and later tax years before using losses from 1995-96 and earlier tax years.
Step 4 - If you still have unused losses from a previous tax year after you've reduced your gains to the Annual Exempt Amount, you can carry them forward to future tax years.

Example
In 2008-09, Mr B sells all of his shares in ABC Ltd and makes a loss of £2,000.

In the same year, he sells his holiday home in Cornwall and makes a gain of £20,000.

He's made no other gains or losses in 2008-09, but has losses from previous years (£15,000 from 2001-02) that he claimed within the time limits.

To work out his Capital Gains Tax, he first deducts his £2,000 losses from his gain of £20,000 for 2008-09, leaving a gain of £18,000 (£20,000 - £2,000 losses = £18,000).

He then uses £8,400 of the £15,000 loss from 2001-02 to reduce the net gain - so that it equals his Annual Exempt Amount of £9,600 (£18,000 gain - £8,400 losses = £9,600).

He has no Capital Gains Tax to pay as his gains after losses did not exceed the Annual Exempt Amount. He'll still need to tell HMRC about his 2008-09 losses and will still need to complete a Self Assessment tax return if he's been sent one.

The £6,600 remaining losses (£15,000 less £8,400 used = £6,600) are carried forward to use in future years.

A-Vic

yes totally agree but thats companies but the person was asking personal tax Personal Tax Computations

A-Vic

although am in total confused mode so i may be wrong

Esme

Thanks Red Dwarf.. After a bit of thinking I figured that was what it meant. Couldn't find that exact 'expression' in my Osbourne book which was confusing as the question was in the same book!

A-Vic, this is correct for Personal Tax, I don't know about Buisness as I'm not doing that unit.

And for 2009-2010 the exempt amoun is 10,100

A-Vic

ive just relised nevermind as staited am having a durr day apologies

reddwarf

Bit unfair to use ' unrelieved' I think!

Esme

My thoughts exactly.. thought this was an Accountancy exam... not an English one, lol!