How is loss in one financial year carried forward into next

[kolata]

I haven't asked my accountant yet. Asking here first. This is very simple example.

Say in this FY my LTD pays me salary of £11k, but there is no work and my turnover is £5k.
At the year end I will be declaring a loss of £6k. Also the LTD will owe me salary money.
No corp tax due.

Next FY I got a good turnover of say, £17k. Still £11k salary.
How will the £6k loss be treated in respect to profit?

1. £17k - £11k - £6k loss/debt = no profit
2. £17 - £11k = £6k profit @20% corp tax

[LondonManc]

I haven't asked my accountant yet. Asking here first. This is very simple example.

Say in this FY my LTD pays me salary of £11k, but there is no work and my turnover is £5k.
At the year end I will be declaring a loss of £6k. Also the LTD will owe me salary money.
No corp tax due.

Next FY I got a good turnover of say, £17k. Still £11k salary.
How will the £6k loss be treated in respect to profit?

1. £17k - £11k - £6k loss/debt = no profit
2. £17 - £11k = £6k profit @20% corp tax

Why ask non-accountants then?

[northernladuk]

I haven't asked my accountant yet. Asking here first. This is very simple example.

Say in this FY my LTD pays me salary of £11k, but there is no work and my turnover is £5k.
At the year end I will be declaring a loss of £6k. Also the LTD will owe me salary money.
No corp tax due.

Next FY I got a good turnover of say, £17k. Still £11k salary.
How will the £6k loss be treated in respect to profit?

1. £17k - £11k - £6k loss/debt = no profit
2. £17 - £11k = £6k profit @20% corp tax

Yes.

[cojak]

Why ask non-accountants then?

Not everyone on here is a non-accountant LM.

[northernladuk]

Not everyone on here is a non-accountant LM.

Indeed but the advice will be worth every penny the OP paid for it.........

[LondonManc]

Not everyone on here is a non-accountant LM.

Fair enough. Google might be quicker though

[GillsMan]

I haven't asked my accountant yet. Asking here first. This is very simple example.

Say in this FY my LTD pays me salary of £11k, but there is no work and my turnover is £5k.
At the year end I will be declaring a loss of £6k. Also the LTD will owe me salary money.
No corp tax due.

Next FY I got a good turnover of say, £17k. Still £11k salary.
How will the £6k loss be treated in respect to profit?

1. £17k - £11k - £6k loss/debt = no profit
2. £17 - £11k = £6k profit @20% corp tax

You can use the loss from a previous year to offset the profit of the next year. So you can carry it over. Alternatively, you can use a loss this year to reclaim the corporation tax paid on last year's profitable year.

Edit - also, if your company "owes" you salary, but did not pay it, then the best thing to do is to credit that salary against the director's loan account IMO. That way the salary still gets "paid", but you pay it into your loan account rather than handing over actual cash.

[Jessica@WhiteFieldTax]

1. £17k - £11k - £6k loss/debt = no profit

All other things being equal, your example 1 is correct.

[VectraMan]

BTW when you do the CT online it says "would you like to carry forward losses from a previous period", and you say yes and enter the number. Couldn't be simpler.

[pr1]

Why ask non-accountants then?

Forum: Accounting / Legal
Financial and legal issues affecting IT contractor companies, including IR35.