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ACCA Applied Skills · Taxation (UK) · The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Orchid Ltd has a current-period chargeable gain of £90,000 and brought forward capital losses of £120,000. It has no other gains or losses. What are the chargeable gains included in Orchid Ltd's taxable total profits, and what loss is carried forward?

Chargeable gains are nil and £30,000 of loss is carried forward. A company must set brought forward capital losses against current gains as far as possible, and it has no annual exempt amount, so the whole £90,000 gain is covered.

  1. AGains £90,000; loss carried forward £120,000
  2. BGains £nil; loss carried forward £30,000Correct
  3. CGains £87,000; loss carried forward £27,000
  4. DGains £nil; loss carried forward £120,000

Explanation

For a company, brought forward capital losses are set against current gains in full, with no annual exempt amount. £90,000 of the loss is used, so chargeable gains are nil and £120,000 - £90,000 = £30,000 is carried forward. Option C wrongly deducts an individual's annual exempt amount of £3,000.

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