Question：Michael, who has been trading for many years, transferred his business to a company on 31 March 2013. He made a loss of ?10,000 in the twelve months to 31 March 2013.
In which three of the following ways may the loss be relieved?
A. Against future dividends from the company.
B. Against future trading profits of the company.
C. Against general income of 2012/13.
D. Against future salary derived from the company.
E. Against general income of the previous three years (LIFO).
The correct answers are: ACD
The trading loss of the sole trader may be carried forward and set off against future salary, interest and dividends of the company, when incorporating the business.
In the closing year of trade, normal loss relief is still available, so the loss may be set off against general income of 2012/13 and/or 2011/12.
Terminal loss relief is also available for the three years before the year of the loss but only against trading income.