I'm new to this site so please forgive what might be seemingly obvious but as a sole trader I'm not sure I've been keeping my books correctly. My first year (09/10) I made a loss on my business and when I completed my tax return, ticked the box to ask for the loss to be offset against any future profits. I started my books again for the year 10/11. What do I do with the loss from the previous year? Should it be brought forward and shown on my books which would mean I've made a loss again for 10/11. Or do I start again from zero? I need to know for my tax return because if I start from zero, (not carrying the loss forward) then I've made a small profit this year, but if I include it in the figures for 10/11 then I've made a loss as the previous year's loss can be offset against the following year's profits. I'm trying to make sure I tick the correct box for "Did you make a loss this year" on the tax return and what I tell the tax credits people!
The income statement (P&L) starts from zero each year, the balance sheet holds the previous years loss in retained earnings (or in this case not so retained).
Tax is completely diffferent to producing the financial statements although the production of the books is the starting point for your tax calculation but the figures used can be quite different.
From the sound of things I think that you might benefit by outsourcing your books to a bookkeeper or accountant rather than spending time doing them in house. Invariably the cost of using a professional is made up for by you having more time to spend on expanding your business.
kind regards,
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.
Thanks so much for responding! I cannot tell you what relief it is to get an expert's opinion! I realise there is a difference between figures for tax purposes and for the profit and loss statement and again for the tax credits people! They all want differing figures. The business is so small (more of a paying hobby) so at the moment, paying a professional to do the books isn't entirely justifiable, although I take your point!
So to clarify, for this year's tax return, I tick the box to say I've made a profit for 10/11 and that's what I tell the tax credits too. Then, for tax purposes, I can offset the previous year's loss against this years small profit.
