Your firm has been asked to provide advice to Granada Ltd. Granada Ltd wants advice on the corporation tax and value added tax (VAT) implications of the recent acquisition of an unincorporated business.

Granada Ltd:
– Is a UK resident trading company which manufactures knitwear.
– Prepares accounts to 31 December each year.
– Is registered for VAT.
– Acquired the trade and assets of an unincorporated business, Starling Partners, on 1 January 2016.

Starling Partners:
– Had been trading as a partnership for many years as a wholesaler of handbags within the UK.
– Starling Partners’ main assets comprise a freehold commercial building and its ‘Starling’ brand, which were valued on acquisition by Granada Ltd at £105,000 and £40,000 respectively.
– Is registered for VAT.
– The transfer of its trade and assets to Granada Ltd qualified as a transfer of a going concern (TOGC) for VAT purposes.
– The business is forecast to make a trading loss of £130,000 in the year ended 31 December 2016.

Granada Ltd – results and proposed expansion:
– The knitwear business is expected to continue making a taxable trading profit of around £100,000 each year.
– Granada Ltd has no non-trading income but realised a chargeable gain of £10,000 on 1 March 2016.
– Granada Ltd is considering expanding the wholesale handbag trade acquired from Starling Partners into the export market from 1 January 2017.
– Granada Ltd anticipates that this expansion will result in the wholesale handbag trade returning a profit of £15,000 in the year ended 31 December 2017.

Required:
(ii) Discuss how Granada Ltd could obtain relief for the trading loss expected to be incurred by the trade acquired from Starling Partners, if it does not wish to carry any of the loss back. (5 marks)