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Trading loss carry back for individuals

What is the mechanism for getting relief for carrying back a trading loss for individuals. By that I mean the form filling and obtaining a refund. Does filling in the box to carry the loss back trigger a refund from HMRC? or do we resubmit the previous years return and enter details of the loss carry back somewhere on that return. I can't find a box for losses brought back.

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08th Aug 2011 13:11

Loss Carry Back

Any refund generated by the carry back of a loss to a prior year is generated in relation to the year in which the loss arose by adjusting the tax due for that year.  The correct way of dealing with this is:

1) To record the amount to be carried back in the appropriate box (33) on the self employment pages of the C/Y Tax Return. 

2) Rerun the previous years tax computation after adjusting the profit arising by the amount of the loss carried back.  This is for your own purposes only so a general adjustment to the years figures will suffice. 

3)The difference between the tax liability on the original P/Y tax comp and the rerun P/Y tax comp is then entered on the current year Tax Return at box 14 of page TC2 (Decrease in tax due because of adjustments to an earlier year).

This will then reduce the tax payable for the current year by the amount of the P/Y overpayment, thereby generating either a reduced C/Y tax bill or tax refund as appropriate.

As far as I am aware there is no need to resubmit the P/Y Tax Return.

Hope this helps.

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By ACDWebb
08th Aug 2011 13:34

You do not need to submit an amended PY return

as there is no change to that or the SA for the PY. You merely calculate the refund based on the PY and claim on the CY return as above

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By blok
08th Aug 2011 14:08

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make sure box 14 of the tax calculation summary pages of the SA return has the tax repayment figure included.

have a look here

http://www.hmrc.gov.uk/helpsheets/hs227.pdf

 

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By thacca
08th Aug 2011 15:37

Thank you

Thankyou for your comments so far.

 

Could someone confirm or otherwise that a trade loss carried back is releivable against class 4 ni as well as income tax?

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By blok
08th Aug 2011 14:42

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yes it is.

 

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By thacca
08th Aug 2011 15:46

Thanks again

and one more question. Can the loss be carried back for income tax but carried forward for NI. Reason being the loss carried back is being relieved at 40% tax and 1% NI. Where as I expect it to be relieved at 20% tax and 9% NI going forward. Can I get the best of both worlds?

 

 

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By blok
08th Aug 2011 20:21

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nice try but you cant do that.  the loss redcues the taxable profits of the previous year which in turn drives the tax and nic charge.

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By mhtax
09th Aug 2011 09:02

Income relieved

It depends on the income concerned and the type of loss claim.

If the loss is against total income any loss set against non-trading income is carried forward for NIC purposes

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27th Jan 2012 14:32

Very useful comments, thanks.

On a related topic, if someone has say £2k of current year trading losses, can they carry back just £1,500 to the previous year and carry forward the remaining £500? Carrying back the full £2k will be wasteful.

Thanks.

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