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ACCA Applied Skills · Taxation (UK) · Chargeable gains for companies

Brannock Ltd, a UK trading company, has a year ended 31 March 2027. It made a chargeable gain of £40,000 on the sale of land and an allowable capital loss of £55,000 on the sale of shares in the same year. It has no other disposals and no capital losses brought forward. What is the treatment of the net position for that year?

Capital losses are set against gains of the same period first, giving a net loss of £15,000 and nil chargeable gains. The remaining loss is carried forward against future chargeable gains only. It cannot be used against trading profits or carried back.

  1. ANet chargeable gains of nil, with £15,000 of loss carried forward to be used against future chargeable gains onlyCorrect
  2. BNet chargeable gains of nil, with £15,000 of loss set against the company's trading profits of the year
  3. CNet chargeable gains of £40,000, with the £55,000 loss carried forward in full
  4. DNet chargeable gains of nil, with £15,000 of loss carried back 12 months against earlier chargeable gains

Explanation

A company's allowable capital losses are first set against chargeable gains of the same period: £40,000 - £55,000 gives a net loss of £15,000. The net loss cannot be set against trading profits and is carried forward against future chargeable gains only. Setting the loss against trading profits or carrying it back is wrong for capital losses. Carrying the full £55,000 forward ignores the compulsory same-year set-off.

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