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Carry forward losses - Best Use of AIA

Hi All,

Our first period of trading (16 months to Feb 12) has given us losses of about 8k. We have AIA (and FYA) available totalling  about 5k.

We anticipate profits (5-8k) in next 12 months to Feb 13 and profits (50k+) in following year.

Should we claim the allowance now and carry forward additional losses or claim later when we are making the profits?

Thanks

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By ACDWebb
23rd May 2012 08:19

It depends

Is there other income received and the ability to offset by set off in year or early year carry back without wasting personal allowances?

If this is the only income and there is no scope to carry back, then on the face of it it might be better to disclaim the allowance now and claim WDA's when there are profits. Obviously that will be at a lesser rate than FYA/AIA, but there might be the possibility to use the extended SLA rules over 8 rather than 4 years so that the advanced relief lost through disclaiming FYA/AIA does not disappear into the general pool.

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By DMGbus
23rd May 2012 08:57

Carry back of losses

The following only applies to partnerships / sole traders (not limited companies):

In the early years of a new trade a special form of loss relief - carry back for relief against prior years' other income - is available.

HMRC helpsheet HS227 has the details (as in defining which years the losses can be carried back against).

When claiming this useful tax relief remember that even though losses are carried back for income tax purposes (for example against employment income) the losses can be carried forward for Class 4 NIC purposes against future profits.

One final thing: don't overlook the possibility of claiming Working Tax Credits for the current year.

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28th May 2012 11:02

Thanks. I should have mentioned that we are a Limited Company. No other Income. Previously or in current period. Whoops

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