Test your understanding
(1). The management of DTU Ltd is planning to sell the company’s trade and assets to HUJ Ltd.
What conditions must be satisfied in order for DTU Ltd’s capital losses to be transferred with the trade to HUJ Ltd?
(2). PLV Ltd has owned 100% of the ordinary share capital of GZI Ltd for many years. GZI Ltd made a trading loss in the year ended 31 March 2021, of which £138,000 was carried forward as at 31 March 2021.
During the year ended 31 March 2022, GZI Ltd made a number of changes to the way it carries on its trade. In particular, it reduced the number of products it manufactures and changed its marketing and branding strategies. It also stopped selling its products directly to members of the public and instead began selling to a small number of wholesalers.
As a result of these changes, GZI Ltd made a trading profit of £74,000 in the year ended 31 March 2022.
Explain whether or not the trading losses carried forward as at 31 March 2021 can be offset in the year ended 31 March 2022.
(3). LGB Ltd owns 100% of the ordinary share capital of EDA Ltd and 80% of the ordinary share capital of KPB Ltd. The trade and assets of EDA Ltd are to be sold to KPB Ltd. EDA Ltd has trading losses brought forward at the start of the accounting period of £71,000.
Explain what will happen to the trading losses of EDA Ltd.
(4). GF Ltd made a loan to one of its passive investors, such that it was required to make a payment equal to 32.5% of the loan to HMRC.
What are the three conditions which would have to have been satisfied in order for this payment not to be necessary?