I have a potential client (so details are a bit sketchy) who purchased a Home Information Pack franchise February 2010. Now that HIPS are dead in the water, I was wondering how CT losses for her first of trading can be offset against any future profits; given that they they can only be offset aginst future profits of the same trade.
Does the same trade have to be exactly the same trade? What if it was something similar; some other type of home information service?
Suppose a roof repairer, for example, branched out into window repairs? Or a car mechanic took on a bit of chauffering? Would they be the same trade? How far apart can two trading activities be and still be classed as the same trade?
Many thanks.
Replies (5)
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Judgement
I think you have to use your own judgement on this and on a case by case basis. In my personal opinion a man who both installed roof tiles and fit windows would be called a builder. However, running a taxi firm and doing motor repairs look like two trades to me. As these services may have been provided by estate agents you could look there for trade indicators. My opinion, on the facts provided, is that it is one trade
HMRC Manuals
I think there's some decent guidance on this within HMRC manuals at BIM70590-BIM70615 (BIM70595 seems particularly pertinent to your query, looking at whether or not the change is organic). BIM70590 also makes the point that the company change in ownership with substantial change in nature or conduct of trade legislation offers further clues (see CTM06370 and SP10/91).
Sadly, I think for your HIPS franchisee, I think it may be hard to present that the trade has moved on organically. As you say, the HIPS work will have simply died and I find it difficult to conceive what subsequent activity would have an adequate nexus in terms of skills applied and market served.
BIM index page: http://www.hmrc.gov.uk/manuals/bimmanual/bim70500.htm
CTM index page: http://www.hmrc.gov.uk/manuals/ctmanual/CTM06300.htm
Maybe
Ernest is spot on with his advice. I always find it interesting that the HMRC manuals (BIM70535 in particular) talk about how different in nature two trades must be to be considered separate for tax purposes. And the fact that there are special anti-avoidance rules for change of ownership AND a major change in the nature/conduct of the trade suggests even more strongly that a change in the nature/conduct of the trade WITHOUT a change in ownership doesn't prevent the losses being utilised.
However, BIM70595 talks about cases where there might be a cessation of a trade followed by a new trade, and this is something in my mind which may catch you out. It points out that where different activities overlap, you are probably safe, but if there is a period with no activities then you seem to be at severe risk of a cessation & new trade.
As with all things in self-assessment, you have to bear in mind that if you don't even try then you won't get anything. If you try, even with a weak position, then at least you stand a chance.
EPC may be OK
As EPC are still needed are where part of the Home Information Pack, I would say they are the same trade.
Could you define the trade as: “Pre sales information provider”?
Is so, drawing house plans and taking photos for agents make be OK as well.