If trading losses in a new partnership are carried back against an earlier self employed profit can the loss affect the Class 4 NIC in the earlier year
I seem to remember it does but HMRC are denying and has only repaid against income tax for the earlier year
I cannot find an answer to this in my reference books
Thanks
Stephen Payne
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Replies (4)
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Yes the legislation is still current
I am really gobsmacked that you are having a problem with HMRC on this. It is far from an obscure situation. You really should not be having to wheel out the guns here. Just refer them to their own manuals:
http://www.hmrc.gov.uk/manuals/nimmanual/NIM24610.htm
Also, I feel on slightly shaky ground here, but does HMRC have any power to disallow the claim on a summary basis? Your client has self assessed. If HMRC don't like it, their redress is (1) to amend the self assessment under section 9ZB TMA 1970, against which you would appeal under ibid s.9ZB(4) or (2) to raise an enquiry under s.9A TMA. Have they done either?
As to claiming the loss relief in future years against NIC when it has for IT purposes originally been claimed against non NIC-able income, there is a box for adjusting NIC profits in the self employment pages. It used to be box 4.25 of the partnership pages, and 3.96 of the sole trader pages. Helpfully (not!) they have removed the unique box numbers in the 2007-08 tax return, I see. Keeping a track of the losses in the permanent file, Excel or database software is another matter. And of course the treatment is different yet again for the purposes of Tax Credits
Thanks again Clint
I did find the legislation with an internet search and have wriiten accordingly to HMRC.
My reference sources are now nicely expanded
I must remember to deal with the non NICable issue in future years!
Thanks Clint
Is this the section that I need to quote at them?
The SS&B act is quite old - not been superceded ?
How exactly in practice do you you deal with the practical aspects of your second point (sched E) ie on the Tax Return
Thanks again
Yes
you should get a reduction in the class 4 NIC
Paragraph 3 schedule 2 Social Security and Benefits Act 1992 refers.
Odd. I have never known this to be denied by HMRC.
What is more commonly the case is the losses are relieved against schedule E income for tax purposes and then carried forward for future NIC relief against profits, but accountants (and their software) quite often overlook that point