Losses for part time business

Losses for part time business

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Our client is building a business and for the first two or three years losses are expected thereafter decent profits will arise.

There is an argument it could be a hobby or they are playing at it, and understand HMRC sometimes restrict losses in these circumstances.

Any thoughts would be appreciated on this

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By zebaa
20th Feb 2012 17:54

No problem

I do not see the problem here, given the information supplied. Businesses often make losses, but it depends on the trade. If there is a loss there are no initial tax implications other than no tax is due. It may be later there is some reason to restrict use of the losses against profit, but there has to be profit in the first place.

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By DMGbus
21st Feb 2012 14:00

"Carried on with a view to profit"

I think the operative phrase is as above - aiming to make a profit.

The fact that losses might initially incurred is irrelevant unless there's no intention to make a profit.

Once losses are established the decision can be made as to how best to gain tax relief - forwards, backwards or sideways with a new trade (asuming NOT in a Ltd Co).

PS. Consider registering for Working Tax Credits ASAP!.

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