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loss on trade but profit on rental income ct600 help needed

loss on trade but profit on rental income ct600...

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

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By Tosie
09th Jun 2012 11:33

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

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09th Jun 2012 11:33

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.

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By Tosie
09th Jun 2012 11:50

to Euan

Yes agree I actually edited my reply. It does say Received from letting .

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By dws
10th Jun 2012 13:24

Thanks to Euan & Tosie

 

Thanks to Tosie and Euan for the quick replies. 

 

TOSIE- sorry, for being so confusing. Letting Profit is 7800. trading adjusted loss is 2788. 

 

In  the ct600 PTP software (in the income section of the CT600 - Trading and professional profits - the "fanned" box 3, )  after entering the loss and the items that need to be added back, the  adjusted profit/loss box comes to a loss of 2788 . 

 

You have to put the income from land and buildings on this screen (as it will not let you type the income from land and building direct in to box 11 on the ct600)

 

Then the software increased the loss to the 10588  i mentioned , and then it  correctly entered the income from land and buildings in box 11 as 7800. 

 

EWAN- many , thanks. My option A -  to set the trading loss off against the letting profit  to give a profit of 5012 -  was my instinctive option. 

 

Will stick with my Excel spreadsheet and continue to use the HMRC software  for filing , rather than this trial PTP  ct600 software. 

 

thanks again. 

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By Tosie
10th Jun 2012 18:54

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.

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By dws
11th Jun 2012 07:56

Tosie- thanks. 

Tosie- thanks. 

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