LOSS RELIEF

When a taxpayer makes profit the tax authority will compute and collect tax on the profit.
It therefore implies that whenever the taxpayer incurs loss, there should be a means of
compensating the taxpayer in form of loss relief.
The principle state that when a business unit incur loss in a particular accounting year of
assessment, such shall be deducted in the futures accounting year when profit is made
before the computation of tax liability.
TYPES OF LOSS RELIEFS
There are two types of loss relief. They are: -
1. Carry forward loss relief
2. Current year loss relief
1. CURRENT YEAR LOSS RELIEF: - Under the current year loss relief, a loss incurred
in any YOA can be relieved out of the total profit from all sources of assessable profit in
the same YOA. Under current year loss relief, the accounting period in which the loss
occur is treated as the YOA i.e. on AYB.
FEATURES
1. It is available only to individual that is company cannot enjoy current year loss
relief.
2. An individual must submit application in written to enjoy current year loss relief
3. The relief is granted on AYB in the year of occurrence of the loss against the
taxpayer’s income from all sources of income on one – off basis
4. Subsequently, the balance is relievable against future income from the source
that the loss was initially incurred
5. Loss can be carried forward indefinitely except agricultural business
2.CARRY FORWARD LOSS RELIEF: - This is available to all taxpayer (individual &
company). This type of relief operates by deducting the loss from subsequent profit of
the same source from which the loss was made.
FEATURES
1. There is no need for a written application n by the taxpayer because it is
automatically granted
2. The relief is done on preceding year basis
3. It is relieved against future income earned from the same source.
4. The loss of a source shall be available for relief against future profit of the same
source, and it is can be carried forward indefinitely except insurance business.
LOSS AT COMMENCEMENT
Where a business just commences trade, the loss that can be carried forward in any
year of assessment shall not exceed the original loss incurred.
LOSS AT CEASATION OF BUSINESS
The relief for loss at cessation of trade is not provided for under the loss of taxation in
Nigeria. Therefore, if there is any loss at cassation of trade such loss shall be deemed
lost i.e. terminal loss. While any unrelieved capital allowance can be carried backward
for a maximum period of 5 years.

1. CLARE has been in business for many years. She has the following adjusted trading
income
Years ended 30 Sept 2001 900,000
Years ended 30 Sept 2002 (2,200,000)
Years ended 30 Sept 2003 (400,000)
Years ended 30 Sept 2004 560,000
Years ended 30 Sept 2005 350,000
Years ended 30 Sept 2006 220,000

She also has annual gross investment income as follows

2001 40,000
2002 50,000
2003 65,000
2004 67,000
2005 72,000
2006 90,000

Required: Assuming a claim for loss relief has been made, compute the assessable
income in all YOA, showing clearly any amount of loss relieve & loss carried forward
2. Alhaji Dambaba Limited has been in business since 1988, the recent adjusted trading
results of the company are as follows:-
Year ended 31st October 1998 800,000
Year ended 31st October 1999 (290,000)
Year ended 31st October 2000 50,000
Year ended 31st October 2001 50,800
Year ended 31st October 2002 40,700
Year ended 31st October 2003 50,100
The company derived N200,000 annually as rental incomes, required to compute the
assessable profit/loss relief & loss carried forward for relevant YOA
3. Mrs Chika commenced business on 1 July 2002 under the name Chika and Son
registered on 1 march 2002
The following information was extracted from his books:
Period to September 2003 loss (150,000)
Year ended 30 September 2004 240,000
Year ended 30 September 2005 (180,000)
You are required to calculate the assessable profit for all relevant years of assessment

4. Seyi law is a business tycoon and consultant who engage in various type of business.
Recent adjusted profit for tax purposes are as follows:
Details Financial services Trading Block Business
Year ended 31/8/10 (140,200) (240,000) 380,000
Year ended 31/8/11 24,000 120,000 (130,000)
Year ended 31/8/12 (74,000) 90,000 270,000

Other incomes disclosed by Seyi are as follows:

Tax year Dividend Gross Pension Rent Gross
2011 14,800 15,000 30,000
2012 28,500 14,200 40,000
2013 20,000 14,800 80,000

Dividend and rent were received net of withholding tax

Compute taxable income for 2011 to 2013 tax year assuming all reliefs are claimable as
soon as possible

5. New idea processing co limited was established in 1998 and commenced business
on I July in the same year. The adjusted profits for the company are stated below:
Period to 30/9/99 (600,000)
Year ended 30/9/00 1,500,000
Year ended 30/9/01 2,750,000
Capital allowance for the relevant years of assessment were computed and agreed with
FIRS as follows:
Year of Assessment Amount
1998 750,000
1999 600,000
2000 700,000
2001 550,000
2002 480,000

You are required to determine the tax liability of the company for all relevant years

6. Aralamo Ltd commences business on 1/4/02 & prepares a/c to 30th June annually.
The following information relate to the business
DETAILS JUSTED PROFIT/ LOSS
Period to 30/6/03 (310,000)
Year ended 30/6/04 600,000
Year ended 30/6/05 150,000

Determine loss relief available to Aralamo Ltd for the 1st 3 Years of assessment.