08-10-2003, 06:22 AM
Pervez this para was written at the end of the above question in the book
Conclusion
Where a company incurs a trading Loss it may claim under S393A ICTA1988 to set the loss against the total profits (before charges) of the loss making Accounting period.
Having relieved the loss against current profits, the company may claim to set the loss against the total profits of the twelve months preceding the accounting period producing the loss. Any loss not relieved under S393A ICTA 1988 is carried forward under S393 ICTA 1988 and set against future profits of the same trade.
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Carry Forward of Trading Losses (S393 (1)) ICTA 1988
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Where a company incurs a loss, it may carry the loss forward and set it off against profits from the same trade in future accounting periods.
The loss can be carried forward indefinitely, there is no time limit for obtaining the relief but it must be set off against first available trading profits.
A claim to establish the amount of loss available to carry forward should be made within six years of the end of the loss making accounting periods.
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Loss Relief Against Total Profits (S393A ICTA 1988)
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Where a company incurs a trading loss it may claim to set the loss against total profits of the (before charges) accounting period producing the loss.
Any trading loss remaining unrelieved may then be carried back and set against total profits (before charges) of accounting periods of the twelve months preceding the loss making period.
If a company has prepared accounts for a period other than twelve months during the twelve months preceding the loss making period , then the results of the accounting period that fall partly outside the twelve month period are apportioned .Loss relief is limited to the proportion of the profits which fall with in the twelve month period.
A claim must be made to relieve the loss against profits arising in the loss making period before a claim can be made to carry the loss back to preceding period.
Companies can claim to relieve the loss against current year profits and not claim to carry the loss back against earlier profits. However, if the loss is carried back, it must be relieved as far as is possible within the carry back period.
If a claim is made to carry back the loss, the set of is against later periods before earlier periods. This is relevant where there is an accounting period of less than twelve months immediately before the loss making period.
Any loss remaining unrelieved after a S393A ICTA 1988 claim is carried forward under S393 (1) ICTA 1988 and relieved against future trading profits of the same trade.
A claim for loss relief under S393A ICTA 1988(either against current year profits or carried back to the previous twelve months) must be made within two years of the end of the loss making accounting period.
A claim under S393A ICTA 1988 must be for the whole loss, including capital allowances. The amount of the loss may be reduced by not claiming the full amount of capital allowances available. A company may claim any amount of capital allowances, up to the full amount, a reduced claim would leave a higher tax written down value on which to claim allowance next year.
Dear Pervez there is a relevant statement regarding carrying back and forward of losses which is relevant to the question under discussion.
âLosses carried forward under S393 ICTA 1988 are set off before loss claims against current year profits or losses carried back under S393 ICTA 1988â
Conclusion
Where a company incurs a trading Loss it may claim under S393A ICTA1988 to set the loss against the total profits (before charges) of the loss making Accounting period.
Having relieved the loss against current profits, the company may claim to set the loss against the total profits of the twelve months preceding the accounting period producing the loss. Any loss not relieved under S393A ICTA 1988 is carried forward under S393 ICTA 1988 and set against future profits of the same trade.
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Carry Forward of Trading Losses (S393 (1)) ICTA 1988
----------------------------------------------------
Where a company incurs a loss, it may carry the loss forward and set it off against profits from the same trade in future accounting periods.
The loss can be carried forward indefinitely, there is no time limit for obtaining the relief but it must be set off against first available trading profits.
A claim to establish the amount of loss available to carry forward should be made within six years of the end of the loss making accounting periods.
----------------------------------------------------
Loss Relief Against Total Profits (S393A ICTA 1988)
---------------------------------------------------
Where a company incurs a trading loss it may claim to set the loss against total profits of the (before charges) accounting period producing the loss.
Any trading loss remaining unrelieved may then be carried back and set against total profits (before charges) of accounting periods of the twelve months preceding the loss making period.
If a company has prepared accounts for a period other than twelve months during the twelve months preceding the loss making period , then the results of the accounting period that fall partly outside the twelve month period are apportioned .Loss relief is limited to the proportion of the profits which fall with in the twelve month period.
A claim must be made to relieve the loss against profits arising in the loss making period before a claim can be made to carry the loss back to preceding period.
Companies can claim to relieve the loss against current year profits and not claim to carry the loss back against earlier profits. However, if the loss is carried back, it must be relieved as far as is possible within the carry back period.
If a claim is made to carry back the loss, the set of is against later periods before earlier periods. This is relevant where there is an accounting period of less than twelve months immediately before the loss making period.
Any loss remaining unrelieved after a S393A ICTA 1988 claim is carried forward under S393 (1) ICTA 1988 and relieved against future trading profits of the same trade.
A claim for loss relief under S393A ICTA 1988(either against current year profits or carried back to the previous twelve months) must be made within two years of the end of the loss making accounting period.
A claim under S393A ICTA 1988 must be for the whole loss, including capital allowances. The amount of the loss may be reduced by not claiming the full amount of capital allowances available. A company may claim any amount of capital allowances, up to the full amount, a reduced claim would leave a higher tax written down value on which to claim allowance next year.
Dear Pervez there is a relevant statement regarding carrying back and forward of losses which is relevant to the question under discussion.
âLosses carried forward under S393 ICTA 1988 are set off before loss claims against current year profits or losses carried back under S393 ICTA 1988â
