Personal Tax FA2015 - practice exam question 11 - CAPITAL GAINS!

Hi All

i am trying to work through the answers to question 11 on the FA2015 practice paper, for personal tax:

"The capital gains for three tax payers for 2015/2016 are shown below, together with their capital losses brought foward from 2014/2015. Gains are before deduction of the AEA.

Show the extent to which each of the losses brought foward will be relieved in 2015/2016

Taxpayer Gain 15/16 Loss 14/15

Huw £43,800 £35,900
Jason £15,800 £3,900
Matt £9,900 £4,400

We are asked to select for each line, whether the full, some or none of the loss is relieved in 2015/2016

Please help as I cannot figure this one out!!

Thanks :)


  • jyo2000
    jyo2000 Registered Posts: 3

    Basically if there are losses to be used from previous years, you can only use them up to the point that chargeable gains for the year equal the AEA. This is so that the AEA isn't lost.

    If gains for the year exceed AEA, then losses from previous years can be offset against the gains, until the gains = AEA. Any unused loss at this point is carried forward to next year.

    If gains for the year are less than AEA, then no loss from previous years can be offset, all losses from previous years are carried forward.

    I tend to do this in 2 steps:
    1) current year gain minus AEA = loss which can be used up. If 0 or negative no loss is relieved.
    2) compare loss which can be used up to losses from previous years (2014/15 losses)

    Loss which can be used up is larger than 2014/15 losses - all loss is relieved
    Loss which can be used up is smaller than 2014/15 losses - some loss is relieved

    1) 43800-11100 = 32700.
    2) 32700 is smaller than 2014/15 loss (35900) = > some loss relieved, 800 worth of losses carried forward.

    For Jason:
    1) 15800-11100 = 4700 This is more than the loss available.
    2)4700 is larger than 2014/15 loss of 3900 => all loss relieved

    For Matt:
    9900 -11100 = -1200. => negative so no loss can be relieved

    It is worth noting that losses from current years must be applied until gains = 0. There is no AEA protection. Any unused current year losses are carried forward to next year, and used up as above.

    I hope that makes things a bit clearer, but let me know if not!

    Kind regards,

Privacy Policy