Acf 311 - Taxation Analysis

ACF311 Coursework

Yixuan Xing

1509826

Word Count: 1122

(i)

[pic 1]

[pic 2]

[pic 3]

[pic 4]

(ii) There are two losses of 16/17 and 17/18, so, that solution is divided into two parts. In the first part, it will list all claims of releasing loss of 16/17 and then search an optimum solution of that. Based on the optimum solution, I will list all claims of releasing loss of 17/18 in order to find the optimum solution of 17/18.

The steps of calculating Alice’s loss relief:

[pic 5]

[pic 6]

Part A (relief the loss of 16/17 with £36971)

Claim1:

Claim in 15/16 will use £25000(note1) for other income and £5000 for trading income of the loss. The rest part of loss will be carried forward to against profit, but relief is given only against trading profits arising from the same trade and there is no such profit in 17/18, so the rest part cannot carry forward to 17/18.

Claim will not waste any of the personal allowance in 15/16, saves £12,000(25,000+5,000)*40%=12,000), but remaining £6971(36,971-25,000-5,000) loss would be carried forward but this is a delayed benefit and the future profitability of the business is uncertain, so it not suggested.

Claim2:

Claim in 15/16 will use £25000(note1) of the loss and £5000 for trading income of the loss. The rest part of loss will be used in 16/17 against the current year income.

Claim will not waste any of the personal allowance in 15/16, saves £12,000 (25,000+5,000)*40%=12,000), and then the rest part of loss about £6971(36,971-25,000-5,000) will be carried forward to 16/17, saves £2788.4(6971*40%). At that time, the total saves are £14788.4.

Claim3:

Claim in 16/17 will use £25000(note1) of the loss. The rest part of loss will be carried forward to against trading income in 17/18, but it cannot be used that the reason is same as the claim1.

Claim will not waste any of the personal allowance in 16/17, saves £12570(45230-32660)(in the chart), but the remaining £11971 (36971-25,000) loss will be carried forward, this is a delayed benefit and the future profitability of the business is uncertain, so it not suggested.

Claim4: 

Claim in 16/17 will use £25000(note1) of the loss. The rest part of loss will be carried back to against other income in 15/16.

Claim will increase the personal allowance with £6425（11000-(109150-100000)/2）  in 16/17, saves£12570(45230-32660)(in the chart), and then the rest part of loss about £11971(36971-25,000) carry forward to 15/16 without any waste of PA, saves £4788.4(11971*40%). At that time, the total saves are £17358.4(12570+4788.4).

Claim5:

All loss will carry forward, but, actually, the loss would not be used because relief is given only against trading profits arising from the same trade and there is no such profit in the 17/18.

So, it cannot save any money in that situation. And this is a delayed benefit and the future profitability of the business is uncertain, it cannot save any money in current, so it not suggested.

In that part, claim4 is the optimum solution.

• Claim in 16/17 will use £25000(note1) of the loss. The remaining £11,971 loss will be carried back to against other income in 15/16.

[pic 7]

Part B (relief the loss of 17/18 with £92040)

Claim1:

All loss will be carried forward to against trading profits arising from the same trade in the future. But this is a delayed benefit and the future profitability of the business is uncertain, and it cannot save any money in current, so it not suggested.

Claim2:

Claim in 16/17 will use £25000(note1). The remaining £67040(92040-25000) loss will be carried forward to against trading profits arising from the same trade in the future.

Claim will not waste any of the personal allowance in 16/17, saves £10,000(25,000)*40%), but remaining £67040 (92040-25000) loss would be carried forward but this is a delayed benefit and the future profitability of the business is uncertain, so it not suggested.