Trading Losses and Capital Gains Tax

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
If a business is sold, can the carried forward trading losses of that business be used against the capital gains liability on the sale?

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    Is the Business a Ltd. Co?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    No, a sole trader.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    Yes it is possible to offset the gain against the losses. I assume you have relieved the total trading loss as far as you can (i.e. carry back etc). BIM 75420 goes into detail about this for you. You may also like to refer to BIM 75205.

    It can be found here:

    http://www.hmrc.gov.uk/manuals/bimmanual/BIM75420.htm

    Best regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    Thanks, I will look into things further.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    I have more information, so now need more help please. My client has had trading losses in his business (which has now ceased) for the past 4 years. According to the legislation I have read the overall loss cannot be set against the capital gains, but must be set against profits of the previous 3 years. There was no profit, just an increasing loss being carried forward. My client has made a profit selling the business, so has capital gains to pay, but there does not seem to be any way to claim the trading loss. Any ideas?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    If you have gone as far as the 36 month rule, then the balance of any losses left will remain unrelieved.

    kind regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    S.72?

    Regards

    Dean

    p.s I'll try and dig out the relevant info.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    In fact Steve has already posted the guidance? :?

    http://www.hmrc.gov.uk/manuals/bimmanual/BIM75420.htm
    http://www.hmrc.gov.uk/manuals/bimmanual/BIM75205.htm

    There is an extention to all the S.3xx claims whereby you make a S.72. This will enable you to relieve any trading losses not utilised in the year (you must make full S.3xx claims before making a S.72) against any chargable gains.

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    Thanks. So looking at BIM 75420 we are saying that my client, who cannot off-set his accrued loss because the previous 3 years plus have all been "loss" years and has now ceased trading, that he can treat the loss as a capital loss because there are chargeable gains on the sale of the business.
    The tax man was disagreeing with this, so I will put a letter to him quoting this manual.
    Thank you for your ongoing assistance!
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    There are certain conditions that have to be met before you can offset the capital gain against trading losses (see FA 1991 s72 TCGA 1992 s 16).

    Always ask the Inspector which section of the Inspector's manual he is referring to when dealing with your query.

    Kind regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    Many thanks - I will do, and I will let you know how I get on. TC
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    Is it usual for the Inspector not to know what I am talking about with regard to claiming terminal loss relief against capital gains?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Trading Losses and Capital Gains Tax

    Sometimes the Inspector dealing with a "general" case may not have knowledge of more technical areas of tax.

    I have come across this problem a number of times and have requested the matter is referred to an Inspector with knowledge of that area of tax.

    Kind regards
    Steve

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