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trading loss reilef for class 4 nics?

client is  a partner in 2 partnerships. One has made a current year profit and the other a current year loss.  I understand that you can offset the loss against the profit for class 4 purposes as well as tax purposes.  Can someone confirm this for me?

Also, I use tax assistant software.  I cannot figure out how/where to do this on the software. Anyone and ideas?

Thanks

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By Ford
10th Dec 2012 16:49

Software often cant....

deal with the Class 4 loss situation, you have to maintain a separate loss memo for tax and national insurance purposes.

You can set off the losses for NIC purposes as well as tax purposes, but only against trading profits, ie those subjected to Class 4 NIC. see HMRC's guidance here http://www.hmrc.gov.uk/manuals/nimmanual/NIM24610.htm

A missmatch between the 2 can arise where you set the losses against general income of the current period as although the losses have been used for tax they have not been used for Class 4 NIC purposes, you can carry them forward against future profits, so in the following year you will pay full tax on the profits but not Class 4 NIC.

There is a box on the tax return self employment (full) pages - Adjustments to profit for Class 4 NIC purposes, box 101 for these purposes. I'd keep the memo in the white space notes.

Ford

 

 

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By imbs
11th Dec 2012 07:46

Thanks ford
I did wonder about the mis match but that explains it!

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06th Aug 2015 12:34

Must the loss C/F for Class 4 NIC purposes be set off against the first available trading profit (as it does for tax) even where the first available profit is below the threshold for paying Class 4 NIC?

For example, loss C/F is £10,000.  Next profit is £5,000 - below the Class 4 NIC threshold.

Must you enter £5K as a Class 4 NIC adjustment on the TaxReturn so that the amount liable toClass4 NIC is nil &carry forward Class4 Losses of just £5000?

 

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