A5 In each of the following situations, show the tax position assuming that the maximum potential reliefs are claimed as soon as possible. Then advise your client of any alternatives that might be available.

(i) Mr de Praet began trading on 1 January 2004, preparing accounts to 31 December annually. Recent results are:

£

Year to 31 December 2008 20,000 Profit Year to 31 December 2009 (40,000) Loss He receives rents of £10,000 annually. It is estimated that the trading profits for the year to 31 December 2010 are likely to be £75,000.

(ii) Henry Percy started a business on 1 July 2005 and makes up accounts to 30 June annually. His adjusted trading results (before capital allowances) for the last two years have been:

£

Year to 30 June 2008 18,000 Profit Year to 30 June 2009 (10,000) Loss Up to 31 December 2008 he always hired his plant and machinery but on 1 January 2009 he purchased a new machine for £7,360. He has no income other than his business profits. (Amended from AAT)