mikes1531
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Post by mikes1531 on Mar 4, 2015 23:30:11 GMT
Does anyone know how long a loss can be carried forward? I'll start with the usual disclaimer that I'm not a tax person or accountant, and I'm definitely outside my sphere of knowledge here, so what you're about to read may be rubbish... If you're asking about capital losses, such as the plumber, that can't be used against income, then I suspect you'd lose it because of the tax-free CG allowance. For instance, say you lost £3k on the plumber and were carrying that loss forward. Then in some future year you sell some shares for a gain of £10k. Presuming the tax-free CG allowance still exists at the current £11k level, then the £10k CG wouldn't cause any CGT to be payable because of the allowance. But what happens to the £3k loss you were carrying forward? My guess -- and it's only a guess -- would be that it would be used against the £10k CG from the shares, so that you'd effectively have a remaining CG of £7k to report that year which, of course, wouldn't give rise to a CGT liability, again because of the allowance. The net result is that the carryforward loss is used up, but doesn't result in any CGT savings. There might be a chance that the use of carryforward losses is optional, so that in this example you'd choose not to use the £3k loss and continue to carry it forward until a year when your CG from shares exceeds the tax-free allowance. That, however, strikes me as being very generous on the part ofd HMG/HMRC, so I'd be very surprised if they offered that. I'd welcome some input from someone who -- unlike me -- actually knows something about CGT.
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kermie
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Post by kermie on Mar 5, 2015 20:39:03 GMT
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mikes1531
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Post by mikes1531 on Mar 5, 2015 21:53:47 GMT
This article is consistent with my understanding of the current situation -- but I am not qualified, so you can't rely on anything I say, etc., etc. But it leaves unanswered the question of whether the taxpayer has a choice of when to use those losses -- i.e. can they save them until they have a CGT liability, or do they have to be used against the next gain even if this wouldn't save any tax because the gain didn't happen to be large enough to exceed the annual allowance?
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kermie
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Post by kermie on Mar 5, 2015 22:35:21 GMT
This article is consistent with my understanding of the current situation -- but I am not qualified, so you can't rely on anything I say, etc., etc. But it leaves unanswered the question of whether the taxpayer has a choice of when to use those losses -- i.e. can they save them until they have a CGT liability, or do they have to be used against the next gain even if this wouldn't save any tax because the gain didn't happen to be large enough to exceed the annual allowance? This article is very clear on that: you can use it when it makes most sense...and continue to carry forward unused losses. www.lawpack.co.uk/tax/tax-magazines/articles/article7653.aspOverall the system seems very fair, actually.
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mikes1531
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Post by mikes1531 on Mar 6, 2015 2:58:57 GMT
This article is consistent with my understanding of the current situation -- but I am not qualified, so you can't rely on anything I say, etc., etc. But it leaves unanswered the question of whether the taxpayer has a choice of when to use those losses -- i.e. can they save them until they have a CGT liability, or do they have to be used against the next gain even if this wouldn't save any tax because the gain didn't happen to be large enough to exceed the annual allowance? This article is very clear on that: you can use it when it makes most sense...and continue to carry forward unused losses. www.lawpack.co.uk/tax/tax-magazines/articles/article7653.aspOverall the system seems very fair, actually. That's good news for anyone with carryforward losses who's likely to have future capital gains in excess of the annual allowance. And more generous than I would have expected from HMG/HMRC.
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kermie
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Post by kermie on Mar 6, 2015 10:04:01 GMT
Agreed, mikes1531 - I was a little surprised too as to how equitable the arrangement is. Clearly this will not last, then ;-) Now all I need to do deal with is that minor matter of manufacturing a sufficiently large taxable gain....  |
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mikes1531
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Post by mikes1531 on Mar 6, 2015 19:12:51 GMT
Now all I need to do deal with is that minor matter of manufacturing a sufficiently large taxable gain.... You could always invest more in the AC equity funding opportunity! 
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Post by solicitorious on Mar 6, 2015 19:20:44 GMT
Gains in that are tax-free. So no luck there.  There's some whacky new outfit where, as I understand it, you become a part-landlord. Presumably there could be some modest CGT implications in that when the property is sold. |
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mikes1531
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Post by mikes1531 on Mar 6, 2015 19:31:03 GMT
Gains in that are tax-free. So no luck there. I had forgotten about that. But I can't say I'm disappointed! There's some whacky new outfit where, as I understand it, you become a part-landlord. Presumably there could be some modest CGT implications in that when the property is sold. Are you thinking of THC? Their project shares could generate CGs, but I don't expect those to be huge since an awful lot of their investors' income will be paid out as dividends during the holding/letting period. Of course, if house prices take off upwards again...
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Post by solicitorious on Mar 6, 2015 19:39:53 GMT
No, CL. My first is as in 'cube, my second as in land'...
Come to think of it, I think you become a director of a company holding the property, so the CGT treatment may differ from your personal treatment.
Alternatively you could put a big wedge (circa £100k) in a structured product. Worked out great when the FTSE was bumping along at 4500-5500. Not sure about now. My gains still never managed to exceed the CGT allowance in any case.
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kermie
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Post by kermie on Mar 6, 2015 20:01:24 GMT
Now all I need to do deal with is that minor matter of manufacturing a sufficiently large taxable gain.... You could always invest more in the AC equity funding opportunity! Ha - I've stuck a little in there - but that is EIS-compliant - so no CGT on disposal (all going well!). As it happens, with the ISA limit now £15k pa - generating a taxable capital gain will be a genuine challenge for most people. At least I've got decades to do it in, I suppose!
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Post by solicitorious on Mar 6, 2015 20:17:11 GMT
Just on the subject of the EIS, I had a nice little chat with Hector (remember him?) about the interaction between IT relief and CGT relief.
If you are thinking of overfunding this (or other S/EIS), beyond the level of your maximum income tax relief (essentially 3.33 x your tax bill) make sure you do declare the value of the whole investment, else you will not benefit from the whole of the CGT relief.
E.g. Tax bill £3k, Max EIS £10k available for income tax relief.
You decided to invest £20k nevertheless. Make sure you declare the £20k.
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