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Question 4b i

Rod has requested advice in relation to the potential income tax relief available in respect of his share of a trading loss of a partnership which he has recently joined.

– Is resident and domiciled in the UK.
– Was employed for many years by Lumba plc, before taking early retirement on 30 June 2018.
– Joined the Thora Partnership on 1 December 2018.

The Thora Partnership:
– Has been carried on for many years by two partners, Abe and Bob.
– Prepares accounts to 30 November annually.
– Admitted Rod into the partnership on 1 December 2018.
– Is expected to make a tax-adjusted trading loss of £47,000 in the year ending 30 November 2019.

The Thora Partnership – profit/loss sharing arrangements:
– The partnership’s profit/loss sharing arrangements from 1 December 2018 are as follows:

Abe Bob Rod
Annual salary £20,000 £20,000 £0
Profit/loss sharing ratio 1 1 1

(b) (i) Calculate Rod’s share of the tax-adjusted trading loss in the Thora Partnership for the tax years 2018/19 and 2019/20.

Note: Your answer to this part (b)(i) should clearly show the relevant basis periods. (6 marks)