we have a small ltd company client that made a small loss this year of 4845 . after adding back depreciation etc the adjusted loss becomes 2788.this obviously does not cause any problems when calculating the corp tax or refund due. they made a profit of 4000 last year.
this year they now rent out the flat above the salon and receive 7800.
would i A) complete the ct600 showing a profit of 5012 (7800-2788) and calculate the tax due or B) would the loss of 2788 be increased by 7800, to make a trading and professional loss of 10588. then add back the rental income to be releived against current profit (the rent) then to make a trade loss of 2788 that could be carried back and set against the previous year's profit of 4000 . thus there would be a ct refund due on 2788 at last years rate (21%).
any help would be appreciated.
thanks
Replies (6)
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Confused
If there is a Loss on Rental Income it is carried forward to be set against future rental profits.Sorry I cannot understand the other points you are making as you saying you have rental income of £7800 but then saying a total loss of circ £10k
Option A
I don't understand your machinations in option B - how on earth can you increase a trading loss with a letting profit?
You have only one option under s.37 CTA 2010 for claiming relief for the trading losses - your option A to set the trading loss against the letting profits of the current year under s.37(3)(a), presumably at 20%.
The possibility of the effect of your option B to claim the current year's trading loss against the profits of the previous year, in preference to the current year, under s.37(3)(b), at 21%, is prevented by s.37(4) which says that only the balance of losses not relieved in the current year can be carried back to the previous year.
[Edit] Tosie - whilst you are quite right, I read the question as a letting profit, not a loss.
got it
You need to include the rental income in the total profits . PTP rightly deducts the rental income but I suspect that you have not included it in 1st place.