Taxation

There are different ways in which trading losses of sole traders and trading partners can be relieved. Some loss relief options give a higher rate of relief by carrying losses forward, but it may be important to some taxpayers to claim relief now rather than later due to cash flow implications.

 

In order to give proper advice and recommendations on a particular course of action it is important to understand the key features of the different loss relief options available based on Income Tax Act 2007(ITA 2007) and Taxation of Capital Gains Act 1992(TCGA1992). This could help to ensure the optimum use of trading losses.

 

You are required:

 

Part A)

 

  • Critically evaluate the different loss relief options available for sole trader and business partners based on Income Tax Act 2007(ITA2007) and Taxation of Capital Gains Act 1992 (TCGA1992).

 

  • Critically evaluate the recent restriction applied on relief for trading losses based on Finance Act 2013.

 

 

Part B)

 

Assume that today’s date is 1 December 2015.

 

David is 35 years old and married to Patricia who is 32 years old .The couple have one child who is six years old.

 

David has been employed since 2000 earning £3,750 per month (Monthly PAYE deducted £616) .He will have no other income in the tax year 2015/16.From 6 April 2016 he will have a source of property business income of £45,000 per year.

David intends to cease his current employment on 31 December 2015, and decided to form a partnership with his wife, Patricia, sharing profit and losses equally, and to adopt a 31 March year end for accounting purposes.

David is anticipating a loss of £40,000 in the first three month period to 31 March 2016, but profits of £62,600 per annum are still anticipated for future years.

 

Required:

Using David anticipated figures, identify the loss reliefs available to David and explain which of the available reliefs would be most beneficial for him to claim.

 

Support your answer with calculations of the income tax (IT) saving achieved in each case.

 

Assume that the tax rates and allowances for 2015/16 apply throughout this question.

                                                                                                                                                    

Assignment Format and Layout

 

The coursework should be typed using 12 pt. Arial with line spacing of 1.5.

 

The word limit is 1,000 words (excluding references) and should not be exceeded.

Your submission should have a title page clearly indicating the Module Code, Your Registration Number and the word count of the coursework.

This coursework will contribute 20% to your overall assessment for the taxation module.

The coursework comprises 2 tasks.

Part A: there should be no need to make any assumptions regarding the task.

This part of the assignment carries a maximum word count of 1,000 and carries 60% of total marks.

Part B:

There is no word limit for this part

A formal report is not needed but your summary should be professionally presented.

Any calculations you include should be in the body of your work. This part of coursework carries 40% of total marks.

 

UG grades and grade point bands [Senate Regulation 2 (2009 starters onwards)] are: A* (17), A+ (16), A (15), A- (14), B+ (13), B (12), B- (11), C+ (10), C (9), C- (8), D+ (7), D (6), D- (5), E+ (4), E (3), E- (2), F (1)

4 marking criteria all equally weighted

Criteria Grade descriptors
Literature Review A.

Clear demonstration of a sophisticated, critical and thorough understanding of the different loss relief options available based on ITA 2007, s64; s72; s83; s86; s89 and TCGA1992, s261B.

B.

Clear demonstration of a well-developed, critical and comprehensive understanding of the different loss relief options available based on ITA 2007, s64; s72; s83; s86; s89 and TCGA1992, s261B.

C. Demonstration of a critical and substantial understanding of the different loss relief options available based on ITA 2007, s64; s72; s83; s86; s89 and TCGA1992, s261B. D.

Provides evidence of some critical understanding of the different loss relief options available based on ITA 2007, s64; s72; s83; s86; s89 and TCGA1992, s261B.

E.

Work does demonstrate evidence a partial but uncritical understanding of the different loss relief options available based on ITA 2007, s64; s72; s83; s86; s89 and TCGA1992, s261B.

F.

Work does not demonstrate understanding of the different loss relief options available based on ITA 2007, s64; s72; s83; s86; s89 and TCGA1992, s261B.

Tax planning with trading losses A. Clear demonstration of a sophisticated, critical and thorough understanding of the factors to consider in choosing between different losses reliefs. B. Clear demonstration of a well-developed, critical and comprehensive understanding of the

 

C. Demonstration of a critical and substantial understanding of the

 

D. Provides evidence of some critical understanding of the

 

E.

Work does demonstrate evidence a partial but uncritical understanding of the

F.

Work does not demonstrate understanding of the

Restriction on relief for trading losses-Finance Act 2013 A. Clear demonstration of a sophisticated, critical and thorough understanding of the recent restriction applied on relief for trading losses based on Finance Act 2013. B. Clear demonstration of a well-developed, critical and comprehensive understanding of the recent restriction applied on relief for trading losses based on Finance Act 2013.

 

C. Demonstration of a critical and substantial understanding of the recent restriction applied on relief for trading losses based on Finance Act 2013.

 

D. Provides evidence of some critical understanding of the recent restriction applied on relief for trading losses based on Finance Act 2013.

 

E.

Work does demonstrate evidence a partial but uncritical understanding of the recent restriction applied on relief for trading losses based on Finance Act 2013.

F.

Work does not demonstrate understanding of the recent restriction applied on relief for trading losses based on Finance Act 2013.

Identifying available loss relief options and calculating   Income Tax saving on each option based on scenario (part B) A. Clear demonstration of a sophisticated, critical and thorough understanding of the most beneficial loss relief option available to taxpayer, correct calculation of loss relief under each option, and giving correct advice to taxpayer based on tax savings achieved under each option. B. Clear demonstration of a well-developed, critical and comprehensive understanding of the most beneficial loss relief option available to taxpayer, correct calculation of loss relief under each option and giving correct advice to taxpayer based on tax savings achieved under each option.

 

C. Demonstration of a critical and substantial understanding of the most beneficial loss relief option available to taxpayer, correct calculation of loss relief under each option and giving correct advice to taxpayer based on tax savings achieved under each option.

 

D. Provides evidence of some critical understanding of the most beneficial loss relief option available to taxpayer, correct calculation of loss relief under each option and giving correct advice to taxpayer based on tax savings achieved under each option.

 

E.

Work does demonstrate evidence a partial but uncritical understanding of the most beneficial loss relief option available to taxpayer, correct calculation of loss relief under each option and giving correct advice to taxpayer based on tax savings achieved under each option.

F.

Work does not demonstrate understanding of the most beneficial loss relief option available to taxpayer, correct calculation of loss relief under each option and giving correct advice to taxpayer based on tax savings achieved under each option.

p(4)

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