Chargeable Gains Companies Major Differences between individuals and Companies No AEA Indexation allowance is available for companiescompensate Inflation froze at December 2017 Different matching rules for share for companies for capital gains ID: 1029363
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1. Chargeable Gains, Losses and Group
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4. “Chargeable Gains- Companies”Major Differences between individuals and CompaniesNo AEAIndexation allowance is available for companies(compensate Inflation): froze at December 2017Different matching rules for share for companies for capital gainsCompanies can get only one relief: Rollover relief
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8. “Indexation Allowance”This allowance was given to compensate inflation, however this stopped by dec 2017 so indexation allowance is given untilEarliest of Date of disposalDec 2017This is calculated by multiplying indexation facto on cost(original cost and enhanced expenditure)
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16. “Matching rules for shares and companies”Same day acquisitionsShares acquired in the previous 9 daysShares from the FA 1985 Pool (this includes purchases from 1st April 1982 to 10 days prior to sale)FA 1985 Pool has 3 elements to consider1.No of shares2. Cost of shares( without indexation)3. Indexed CostWe have to calculate indexation rise between 2 operative eventsOperative events[Purchase,disposal,rights issue]Non-Operative events [ Bonus issue Re-organisation and take overs]Indexation Allowance= Indexed cost-Original costIndexed rise= Previous indexed cost*Indexation factor for that period
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22. Trading Losses for companies1.Current period relief2. Current period and carry back relief3. Current period and carry forward relief4. Current Period, Carry back & Carry forward Relief5. Carry forward reliefA company may claim to deduct a trading loss incurred in an accounting period from its total profits of the same Accounting periodRemember its accounting period for companies(not tax year)The company cannot choose the amount of loss to be relieved in current period relief (QCD may be Lost)It has to be claimed as much as possible
23. Carry back loss reliefTrading losses can be carried back and offset, as much as possible, against total profits (i.e. before QCDs) of the preceding 12 monthsBut current period claim must me made firstNo restrictions like Individual general income and amount can’t be chosen due to which QCD may be lostSo,if the previous A/c period is less than 12 months, then it can be extended and carried back till previous months total profits are fully exhaustedIf the Period falls partly outside the prior 12 months, the loss relief is limited to the the proportion of the period’s total profits(that is before QCD) equal to the proportion of the period which falls within 12 months
24. “Carry Forward Trading Loss Relief”This is the only relief where the tax payer can choose the amount of loss reliefThis is automatic, if no claim is made, then it is automatically carried forwardThe tax payer can choose the amount of loss relief to be claimedSo the company can restrict the loss relief amount & QCD will not be wastedIf it is not fully relieved, then it will be automatically carried forward to next A/c periodThis loss relief could be set-off against total profits unlike “Individuals”Factors affecting choice of loss relief1.Timing of relief-earliest loss relief claim will always be preferred2. QCD3.Tax Rate
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29. “Terminal Loss Relief”For trading losses incurred in the 12months up to the cessation of trade (Terminal Losses), The carry back period is extended from 12 months to 36 months , Later year firstThis also will be set off against total profits(in the case of individuals it will be set off against same trade only)“No early trade loss relief for companies”Property LossesThis can be set off against , of the current accounting period .This is automaticCarried forward and claim made to offset ,wholly or partly ,against future total profits and the amount of loss could be reduced partly to save QCDNo carry backward period for both Individual and Company in terms of Property Loss
30. Capital Losses can only be set off against capital gains in the same or future Accounting PeriodsCapital losses cannot be set off against any other IncomeCapital losses cannot be carried backThe amount of losses cannot be reduced, it has to be as much as possible and against “Capital gains only” It will be adjusted within the calculation of Capita gains
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