loss reliefs

loss reliefs
Relief available to sole traders, partnerships, and companies making losses, as adjusted for tax purposes. Capital allowances can create a trading loss or can enhance it. Trading losses can be carried forward to set against future trading profits. For sole traders and partnerships, trading losses can be set against other income for the year of the loss and for the previous year. Partners can decide individually how to use their share of the losses. Special rules apply to trading losses in the early years of a trade. These losses can be carried back three years to a period before the trade commenced. From 1991–92 it has been possible to set trading losses against capital gains if the loss cannot be used first by setting against other income during the year. Terminal-loss relief is available when a trade is permanently discontinued and a loss is made during the last 12 months. In such cases, a trading loss can be set off against the profits of the three previous accounting periods provided the company was carrying on the same trade during that period. Capital losses can be set against capital gains in the same period. Any surplus capital loss that cannot be utilized during the current year must be carried forward to set against future capital gains. Capital losses cannot be set against other income, unlike trading losses.

Accounting dictionary. 2014.

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