Invoicing for contract work through unrelated business

[pastybap]

So I own a retail business (Ltd Co). But I’ve also been offered contract work in an unrelated industry. The retail business is currently loss-making, but I’d like to invoice for my contract work through this Ltd company to offset these losses. Would this be allowed by HMRC?

[hugebrain]

So I own a retail business (Ltd Co). But I’ve also been offered contract work in an unrelated industry. The retail business is currently loss-making, but I’d like to invoice for my contract work through this Ltd company to offset these losses. Would this be allowed by HMRC?

Yes, you can do it (unless your articles of incorporation forbid it) but you can only offset losses in the current year, not losses carried forward.

[northernladuk]

Do you have an accountant as they should be your first port of call.

Taking advantage of a loss making business to reduce the tax burden on a different piece of work sounds like a very dodgy approach to me but then I don't have much of a clue.

How much will you be billing the other work and for how long? If it becomes more than the original business you are going to have problems with your SIC codes.

I'll bet this is one of those threads that starts to unravel as the details are drip fed.

[Maslins]

Current year trading losses can be offset against any/all profits within the same entity in the current year.

Historic trading losses brought forward can only be offset against future profits from the same trade.

So if your retail side makes a loss this year, and your contracting side makes a profit, you can offset the former against the latter.

If the retail has been making trading losses for multiple years, those brought forward losses can only be offset against future profits from the retail trade. You can't legally offset those retail losses brought forward against new contracting profits, even if you do it via the same company.

[northernladuk]

I've already mentioned it but you really need to get an accountant if the consultancy work is going to be significant. You've already come a cropper once not getting professional advice.
https://forums.contractoruk.com/acco...quidation.html

It was suggested you get proper advice in that thread and now you've got a situation that, I believe, isn't as straightforward as what you are making out to us so again get professional advice and an accountant. Getting it wrong is going to cost you a lot more than the price of a decent accountant.

[Craig@Clarity]

Yes you can as another poster has said. Other things to consider/be aware of is the implications on VAT, insurance, commercial aspects and how one trade may affect the other if things go wrong. Are there any other shareholders or directors and do they need to have input and does the contract stipulate that you have to be majority shareholder and sole director (I've seen some contract have these clauses in)? Is your accounting software adequate for trade other than retail? Assuming the contract is IT related or similar, is it inside or outside IR35? Is it subject to Off-Payroll rules? How long is the contract for? Is there potential for a renewal? Have you considered going umbrella? Just food for thought.