Question 32c

Ashura has been employed by Rift plc since 1 January 2013. She has also been self-employed since 1 July 2015, preparing her first accounts for the nine-month period ended 5 April 2016. The following information is available for the tax year 2015–16:

(1) During the tax year 2015–16, Ashura was paid a gross annual salary of £56,200.

(2) On 1 January 2016, Ashura personally paid two subscriptions. The first was a professional subscription of £320 paid to an HM Revenue and Customs’ (HMRC’s) approved professional body. The second was a subscription of £680 to a health club which Ashura regularly uses to meet Rift plc’s clients. Ashura was not reimbursed for thecosts of either of these subscriptions by Rift plc.

(3) During the tax year 2015–16, Ashura used her private motor car for business purposes. She drove 3,400 miles in the performance of her duties for Rift plc, for which the company paid her an allowance of 55 pence per mile.

(4) During the tax year 2015–16, Ashura contributed £2,800 into Rift plc’s HMRC registered occupational pension scheme and £3,400 (gross) into a personal pension scheme.

(1) Ashura’s tax adjusted trading loss based on her draft accounts for the nine-month period ended 5 April 2016 is £3,300. This figure is before making any adjustments required for:

(i) Advertising expenditure of £800 incurred during January 2015. This expenditure has not been deducted in calculating the loss of £3,300.

(ii) The cost of Ashura’s office (see note (2) below).

(iii) Capital allowances.

(2) Ashura runs her business using one of the five rooms in her private house as an office. The total running costs of the house for the nine-month period ended 5 April 2016 were £4,350. No deduction has been made for the cost of the office in calculating the loss of £3,300.

(3) On 10 June 2015, Ashura purchased a laptop computer for £2,600.

On 1 July 2015, Ashura purchased a motor car for £19,200. The motor car has a CO2 emission rate of 137 grams per kilometre. During the nine-month period ended 5 April 2016, Ashura drove a total of 8,000 miles, of which 2,500 were for self-employed business journeys.

Other information
Ashura’s total income for the previous four tax years is as follows

Tax year Total income
2011–12 10,700
2012–13 10,400
2013–14 48,800
2014–15 54,300

(c) Explain why it would not be beneficial for Ashura to claim loss relief under the provisions giving relief to a loss incurred in the early years of trade.

Note: You should assume that the tax rates and allowances for the tax year 2015–16 also applied in all previous tax years. (2 marks)

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