Hi,
A sole trader client made first year losses, in his second year of trading he made a small profit, my understanding is that the losses can be offset against the first available profits.
1) would i compute their tax computation as normal using the profits, and in the tax return 2007 entering the loss in the required box, or should i be bringing in the loss in the tax computation and offsetting it against the profit.
2) should i also be claiming capital allowances, as he has a Van and general pool.
many thanks for any advice.
regards
Anon
anon
Replies (2)
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re
1) Yes, though of course depending on previous years income you might instead look to throw the losses backwards
2) Depends on the numbers, but if you are going to waste allowances then it might be better to retrsict the claim or totally disclaim.
And don't forget that
if you carry the loss backwards for income tax purposes it can still be carried forward for Class 4 NIC purposes.