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

Elmhurst Ltd sold shares in an unconnected company in the year to 31 March 2027, realising a chargeable gain of £48,000. It also has a trading loss of £30,000 in the same year and a capital loss of £20,000 brought forward. Which statement is correct about taxable total profits? Assume trading profits before the loss are £100,000 and there is no other income.

Taxable total profits are £98,000. The £20,000 capital loss reduces the £48,000 gain to £28,000, and it cannot be used against trading profits. Total profits are £128,000, and the £30,000 current year trading loss is then deducted against them.

  1. ATaxable total profits are £98,000, as the trading loss is set against total profits including the net chargeable gain of £28,000Correct
  2. BTaxable total profits are £70,000, as the capital loss is set against trading profits and the trading loss against the gain
  3. CTaxable total profits are £128,000, as the trading loss can only be carried forward
  4. DTaxable total profits are £78,000, as the trading loss is set against total profits including the whole gain of £48,000

Explanation

The brought forward capital loss is set against the gain: £48,000 - £20,000 = £28,000 net gain. Total profits are £100,000 + £28,000 = £128,000. The current year trading loss of £30,000 is then relieved against total profits, giving £98,000. Capital losses cannot be set against trading profits, so £70,000 is wrong. Option £78,000 ignores the capital loss.

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