class 2 with losses b/f

class 2 with losses b/f

Didn't find your answer?

Client had loss in 13/14 of 7K, profit in 14/15 of 6K so had losses b/f of 1K.

Obviously no thought of class 4!  Would the 6K in 14/15 be "covered" by LEL or whatever the 8,060 is or is it using up the 6K of class 4 loss b/f. I think it is.

IN 15/16 client has 11K (suspiciously?). Is class 4 due on 11K less 1K less 15/16 LEL  = 2K . I think so.

 

THank you

Replies (12)

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RLI
By lionofludesch
10th Jan 2017 16:52

What's your query on Class 2 ?

Thanks (1)
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By HeavyMetalMike
10th Jan 2017 17:05

That's a very good point.!!

Yes I mean class 4 please. And I should add the losses of 13/14 were NOT used against other income so did get used against 14/15 and wasted PA for income tax purposes.
So do same rules apply for class 4 please? I assume I need to waste the LEL in 14/15 too? I cannot say 11K for 15/16 less 7K loss in 13/14 means no class 4 in 15/16?

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RLI
By lionofludesch
10th Jan 2017 17:15

Class 4 losses are a separate claim. You don't have to use them in the same way as Income Tax losses.

Based on carry forward, Class 4 assessments are

13/14 nil
14/15 nil
15/16 £10000

Total agrees with your overall profit of £10000 for the three years.

Thanks (1)
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By HeavyMetalMike
10th Jan 2017 17:58

Thanks. So I make a separate adjustment on the self employ page for the extra 2K to bring the total "profit for class 4" to 8K? Seems a bit of a scam to me that I can do that, and preserve the LEL.

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Replying to HeavyMetalMike:
RLI
By lionofludesch
10th Jan 2017 18:39

HeavyMetalMike wrote:

Thanks. So I make a separate adjustment on the self employ page for the extra 2K to bring the total "profit for class 4" to 8K? Seems a bit of a scam to me that I can do that, and preserve the LEL.

What adjustment ? There is no £2k. Fogged.

Check your arithmetic.

Thanks (1)
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By HeavyMetalMike
10th Jan 2017 19:14

Sorry, but the tax comp has 11K less 11K losses so no IT. But it's then doing class 4 on 2K which appear to be ALL of class 4 losses left.
But you say we don't need to the same for class 4 as we do not IT, class 4 is NOT use it all up? You say no class 4 in 14/15, the 2nd year. Is that because the 6K before losses is already below that year's LEL or because losses MUST be b/f before deducting the LEL? IN which case there are just 1K of class 4 loss in 15/16. Or am I just foggy?
Cheers

Thanks (0)
Replying to HeavyMetalMike:
RLI
By lionofludesch
10th Jan 2017 22:12

£11000 losses ? How ?

You only had £7000 to start with !!

Thanks (1)
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By HeavyMetalMike
11th Jan 2017 10:32

I'll start again and check my sums before I click send.
13/14 7K loss.
14/15 6K profit
So no tax easy.
My query please is - is there no class 4 in 14/15 because 6K is less than the LEL (or equivalent terminology for class 4) or is it because 6K less 6K of loss b/f is nil.
Therefore what is class 4 for 15/16. 11K profits less 1K unused losses (the income tax is based on this) or is it 11K profits less 7K losses b/f?
THank you

Thanks (0)
Replying to HeavyMetalMike:
RLI
By lionofludesch
11th Jan 2017 10:56

Because £6ooo less £6000 loss is nil. Leaving £1000 loss to deduct from the £11000 in the following year.

You don't have to use the same loss relief as income tax but pretty much the same rules apply as regards how the loss is relieved.

A common scenario is carrying back income tax losses in the first year of the trade but carrying forward Class 4 losses because there are no Class 4 profits in the past against which the losses could be relieved.

Thanks (1)
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By HeavyMetalMike
11th Jan 2017 12:01

Thank you. I thought that was the case (6K less 6K) but obviously I've never had a case like this before where profit in year 2 is low enough.
Much appreciated. I might ask this via a separate question, but it turns out the loss in 13/14 could have been c/b and refund. But what happened was 14/15 had 6K profits less 6K profits so wasting PA. I guess this can still be done by Overpayment relief claim. Guess I need to amend 14/15 on-line this month. I haven't looked, I will I'm not that lazy :) Just saying.........

Thanks (0)
Replying to HeavyMetalMike:
RLI
By lionofludesch
11th Jan 2017 12:16

Still in time to amend the 2015 return.

20 days to go.

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By HeavyMetalMike
11th Jan 2017 12:33

I know that bit :) It's the claiming of 13/14 c/b to 12/13 which is the hard bit. Still in time.
Thanks for your help. Much appreciated.

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