1. If a newly self employed person records a loss from business activity, can the loss be split, to carry back part of it to set against other income in the previous 3 years, and the other proportion to set against profits arising in future years? Or does it all have to be carried either forwards, backwards or sideways?
2. Can a Capital Loss be carried forward to set against future gains even if a person has a chargeable gain (eligible for entrepreneurs relief) in the same tax year. Or must the loss be set against the gains made in the same tax year, if that makes sense! The reason I ask is that if the capital loss is set against a capital gain eligible for entrepreneurs relief in the same tax year, you would only benefit from 10% relief on the loss, as opposed to 18%+ if it is carried forward to future years.
1, It is my understanding that you can only carry losses back and forward against income from the SAME trade, you can only offset losses against other income in the same year.
2, i also believe that capital losses MUST be offset against capital gains in the current year, untill either there there are no more gains or no more losses left. I know it is a bit late now but if it could have been helped these disposals should have been planned to be in different years if at all possible.
However i stand to be corrected.
Nick
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Nick
Nick Craggs FMAAT ACA AAT Distance Learning Manager
The problem with losses is that you must carry the whole lot forward or backwards, even if it means setting against profits for a year which then loses the benefit of the personal allowance.
If it's not too late, you may wish to consider waiving capital allowances if they have been claimed and have created or added to the loss.
Yes, not claiming the allowances is an option I have considered. However, low or no profits are anticipated for the business in the coming years, so if I waive the allowances and carry them forward, is there any way that the allowances carried forward could be claimed within another business activity carried on in the future by the self employed person (where those assets are used within the two businesses)?
They will only be able to be claimed within the same business activity won't they?
Sorry, I forgot to mention that the loss making business may end up ceasing in the next few years and the person may transfer the assets to a new business.
Sorry, I misunderstood. I don't know all the circumstances, but it seems the way to go is to cease making a loss on the first business and transfer the assets straight away. Remember, the Revenue can deny a loss claim where there is no intention to make a profit.
Yes, transfer the assets is the way forward I think. The assets can be transferred to the new business at the written down value (for capital allowance purposes) as they stand at the end of April 11, so if the capital allowances are not claimed this tax year, the balances transferred will be higher and therefore the new business would benefit from the waived capital allowances going forward. Any adjustment for gains/losses on the transfer will then obviously go through the p and l accounts in the normal way.
Two accountants have now told me that is the way. If anyone disagrees let me know!
I didnt actually realise that if you don't claim capital allowances of say £5000 in one year, you dont' simply carry forward the £5000 to claim next year plus further allowances in the next year. You actually just leave the asset balances unchanged and claim the percentages on the carried foward balances the following year, which in effect would be £5000 again if everything remained the same.
