HMRC: carrying back a trading loss

[mkant]

I have asked this Q of my accountant, but he was not convincing , so would like some other viewpoints.

Fin Year 09/10: my company had a £80k turnover and a CT bill of £10k. No problem with the CT amount.

Fin Year 10/11: I'm taking some family time off, then looking for work. It's very likely in this year that my Admin Expenses (Salary etc.) will exceed Turnover, and my company will make an Operating Loss (1st time ever). Again not a problem, I've enough distributable reserves from which to pay Salary.

But as most of my Admin Expenses are indeed Personal Salary, would HMRC allow me to claim for the 10-11 Loss to be offset against those 09-10 Profits?

Or is it likely that HMRC would refuse offset tax relief because the Loss was primarily caused by expenditure (Salary) which was not "incurred for the purposes of the trade".

thanks for reading...
Michelle

[Robot]

I have asked this Q of my accountant, but he was not convincing , so would like some other viewpoints.

Fin Year 09/10: my company had a £80k turnover and a CT bill of £10k. No problem with the CT amount.

Fin Year 10/11: I'm taking some family time off, then looking for work. It's very likely in this year that my Admin Expenses (Salary etc.) will exceed Turnover, and my company will make an Operating Loss (1st time ever). Again not a problem, I've enough distributable reserves from which to pay Salary.

But as most of my Admin Expenses are indeed Personal Salary, would HMRC allow me to claim for the 10-11 Loss to be offset against those 09-10 Profits?

Or is it likely that HMRC would refuse offset tax relief because the Loss was primarily caused by expenditure (Salary) which was not "incurred for the purposes of the trade".

thanks for reading...
Michelle

I don't see a hugh problem with this ...

You said "carrying back a trading loss" so you were trading during the year.

Did you P45 yourself ? No, so you're still entitled to take a salary from the company.

"Or is it likely that HMRC would refuse offset tax relief because the Loss was primarily caused by expenditure (Salary) which was not "incurred for the purposes of the trade". "

But you did trade, you didn't really cease trading, sure you took a fortnight off with the family and then went looking for work again, you do have proof you were looking for work...don't you

Robot

[zedAccounts]

>But as most of my Admin Expenses are indeed Personal Salary, would HMRC allow me to claim for the 10-11 Loss to be offset against those 09-10 Profits?

No. You offset the 10-11 losses against future years' profit.

ZED.

[Stag Cozier]

I have asked this Q of my accountant, but he was not convincing , so would like some other viewpoints.

Fin Year 09/10: my company had a £80k turnover and a CT bill of £10k. No problem with the CT amount.

Fin Year 10/11: I'm taking some family time off, then looking for work. It's very likely in this year that my Admin Expenses (Salary etc.) will exceed Turnover, and my company will make an Operating Loss (1st time ever). Again not a problem, I've enough distributable reserves from which to pay Salary.

But as most of my Admin Expenses are indeed Personal Salary, would HMRC allow me to claim for the 10-11 Loss to be offset against those 09-10 Profits?

Or is it likely that HMRC would refuse offset tax relief because the Loss was primarily caused by expenditure (Salary) which was not "incurred for the purposes of the trade".

thanks for reading...
Michelle

As one poster said, you have not ceased trading. There is just no trade in that year (10-11). Just because there was no income doesn't mean that the company cannot continue to pay a salary e.g. if you worked in a newsagent and no-one came in to buy any newspapers or sweets, would you still get paid? Yes, unless you are made redundant, but let's not go down that route!

If all your expenses in 10-11 is salary, accountancy fees and other expenses, but no turnover, the expenditure is allowable. Who's to say you weren't keeping an eye out for the odd contract here and there?

The loss you would generate in 10-11 can either be offset against 09-10 (carry back) or be offset against 11-12 (carried forward).

What did your accountant say?

[ASB]

Carry back is still usually allowed. You seem to be carrying on the same trade which is the major hurdle. Talk to HMRC about the particular position might be useful...

http://www.hmrc.gov.uk/budget2009/bn13.pdf
Carrying a trading loss back | Business Link
Corporation Tax: trading losses: relief against total profits: preceding accounting periods: general

[SueEllen]

[QUOTE=Stag Cozier;1146018]

What did your accountant say?[/QUOTE

First part of the OP states she has asked her accountant and wasn't convinced with the reply.

I don't know whether it's a communication problem or the fact that she heard what she doesn't want to hear but if it's the former then it's time to change accountants.

[mkant]

No. You offset the 10-11 losses against future years' profit.
ZED.

ZED, very forthright, any reason why you're against carrying back the losses?

[mkant]

Thkx for all the replies - there's more info there than I'd get out of my accountant in a month of Sundays. He also said 'yes', but then started talking about reducing salary (why?). Him and I speak a different language and culture, and I find it very frustrating dealing with him.

Time to change.

I'd prefer to carry back than forward, as that 09-10 CT Bill was the highest I've had for some years. Be nice to make it smaller...

[Stag Cozier]

Thkx for all the replies - there's more info there than I'd get out of my accountant in a month of Sundays. He also said 'yes', but then started talking about reducing salary (why?). Him and I speak a different language and culture, and I find it very frustrating dealing with him.

Time to change.

I'd prefer to carry back than forward, as that 09-10 CT Bill was the highest I've had for some years. Be nice to make it smaller...

It's like the general election all over again..."Time for change"!

Have you thought about pension contributions too in 10-11? That's going to make an even bigger loss to carry back

[mkant]

Have you thought about pension contributions too in 10-11?

I hadn't, but I am now . But that's really where I came in - at what point would HMRC be unhappy at me getting all creative with my 10-11 Loss?