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Post Info TOPIC: self employed P&L showing a loss
lor


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self employed P&L showing a loss
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Hi all, just a quick one,

if for example a se person made a loss of £18,000.00 in the tax year 09/10, when the tax return is filed, does this mean that they will receive a refund of (18,000.00 x 20%) £3600.00????. Or does HMRC like them to allocate over a few years?

this is confusing me a bit! (or a lot!)

I have been asked the question and don't want to give a wrong answer.


Sorry for the question but I haven't deal't with a loss of this amount before.

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RobH


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Are you carrying the loss back and using against previous profits Lorraine?

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RobH


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Lorraine, losses can be carried back and used against profits in the previous 3 years to generate a tax refund or can be carried forward to use against profits for the future. Obviously carrying back will generate a refund faster.

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Rob
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Shamus


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Hi Lorraine,

you've asked a day too early. Just come to that section in my studies... Seems a pretty big section so must be something in there that's not so straight forwards.

Robs definitely your man for this as he's ATT so this is his ball park that I'm just playing in.

Regardless of that though I think that the rule is that if you want a refund you have to claim it otherwise its carried forwards against he first available profits against which it can be offset.

Watch this space. I'll have a better answer as soon as I've been through these 11 sections... Thanks for the motivation. Need some today as I've had it up to the back teeth with basis periods and overlap profits!

Talk later,

Shaun.

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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
RobH


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Shaun, the only thing you need to know about basis periods and overlap profits is to make all new clients go to 5th April year end...saves alot of headaches!

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Rob
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lor


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thank you for your replies, it is his 1st year trading, so would that mean the whole loss could be set off against that 1st year??

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RobH


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Hi Lorraine,

He has to have profits to offset the loss against. If this is his first year, then the losses will not be wasted but can be offset against future profits. So he is not entitled to a refund, but next year if he makes a £10k profit he can use some of the losses against the profit so he will not have a tax bill, unused losses would then be carried forward to the following year. If in year two his profits are £30k, then you would use all the losses against the profits thus mitigating his tax liability. If however he makes another loss, the losses can be aggregated and carried forward.

-- Edited by RobH on Thursday 18th of March 2010 11:23:03 PM

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Rob
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lor


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Thanks for clearing that one up ROBH.

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adi2402


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Rob is correct, but i thought i would just add that the losses in the year can be offset against other income also (in 09/10), so if he has employment income etc there is scope to get a refund in the year.  Be wary of wasting personal allowances though.

Otherwise as Rob mentioned you will need to carry these forward to offset against profits of the same trade.

Cheers
Iain

-- Edited by adi2402 on Sunday 18th of April 2010 10:21:10 AM

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