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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3820
Experience:  FCCA FCMA CGMA ACIS
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From 2013/14 what are the maximum losses that can be carried

Customer Question

From 2013/14 what are the maximum losses that can be carried back from that tax year to earlier years ?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
Please advise, are you referring to individuals or companies?
Customer: replied 2 years ago.

Individuals

Expert:  bigduckontax replied 2 years ago.
You can carry back against income or capital gains for one year unless you are in the first four years of trading when one can go back further.
You can find a useful guide here:
http://www.taxguideforstudents.org.uk/working/self-employed/working-out-profits-losses-and-capital-allowances/what-if-i-make-a-loss
I do hope I have assisted you with your question.
Customer: replied 2 years ago.

Thank you but with the £50,000 cap on losses from 2013/14 are the carry backs restricted to this figure ?

Expert:  bigduckontax replied 2 years ago.
The carry back is limited to the loss, but there are transitional arrangements. Here is HMRC advice form Help Sheet 204:
'Some trading losses can be carried back and set off against the income of an
earlier year other than the year of loss (see Helpsheet 227 Losses). Relief for
trading losses made in years prior to 2013–14 are not subject to the limit.
But if trading losses of 2013–14, or a later year, are carried back to a year
before 2013–14, the limit does apply and is calculated using the adjusted
total income of that earlier year. and is capped at 50K except for capital losses. Any unrelieved loss may be carried forward.'
You are in the clear on this one as the 50K limit does not apply to the carry back. You should be careful not to carry back so much that you put the personal allowance in jeopardy.
Customer: replied 2 years ago.

I'm a little confused I'm afraid.

The help sheet you quote says trading losses of 2013/14 are carried back to a year before 2013/14 the limit does apply and is capped at £50k except for capital losses. However the your answer says the £50k limit does not apply ?

Also is this for only one year ? could losses from new trade in 2013/14 be carried back for 3 years ?

Expert:  bigduckontax replied 2 years ago.
The wording of the Help Sheet is indeed confusing and very poorly presented. It is:
'if trading losses of 2013–14, or a later year, are carried back to a year
before 2013–14, the limit does apply'
And immediately before it it says the limit does not apply to pre 13/14 losses thus making interpretation almost impossible.
Trading losses in a new business environment can go back up to four years. If your losses are over 50K then any balance not relieved by carry back may be carried forward.
Don't forget to watch out that you do not to extinguish personal the allowance when using carry back.

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