Carried Foward Losses

Carried Foward Losses

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I have a client that was a partnership and now has set up a limited company with the previous partners as directors. Are they able to carry forward any losses from the partnership into the limited company or are they lost?
Jennifer Rolt

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By User deleted
21st Sep 2006 19:06

Consider carry back instead ?
It might be worthwhile studying the effect of alternatively carrying back the losses under the Terminal Loss provisions.

If you DO decide to carry the losses forward for income tax purposes offset against salary, then consider if it still is (used to be) possible to carry the losses back for Class 4 NIC purposes to get some Class 4 NIC refunded from past years. This NIC quirk is that the losses arise and can be used for two purposes ie. (a) Income Tax and (b) Class 4 NIC.
In the pre-SA era I do recall carrying forward losses for Class 4 NIC purposes and carrying the same losses back for income tax purposes, this was in a business start up scenario.

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By Peter Cane
21st Sep 2006 14:45

Partly
The partnership is transparent for tax purposes, and so each partner will have their own share of losses at the date of cessation of the partnership.

It is not possible to transfer the losses per se to the limited company itself, but I believe under S386 ICTA each partner can carry forward their share of the losses and set them off against future income they derive from the company.

From memory, I believe the losses must be set off against salary first, then against dividends. Any excess would be carried forward and set against the next year's salary etc.

But you might want to check the finer details

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