Company trading loss relief

Company trading loss relief

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Hello,

I have a Limited Company client who's main trading activity is packaging and selling bottled beer.

Last year, the company made a large loss and my client is now looking into the possibility of changing his main trading activity to Gin production.

He has asked whether he can offset his losses against future profits under the same company.

My understanding is that he can not do this because these are two different trades with two different SIC codes and therefore the Beer losses can not be offset against future gin profits. Only pre-trading expenses relating to Gin production could be offset against future Gin production profits.

Also, group relief is not an option as there would have to have been a group relationship for the accounting period that the losses occurred.

Could you please confirm that my understanding is correct?

Apologies for what may appear to be a basic question to some. I have mainly been dealing with sole traders and have not had to deal with company losses as yet.

Kind Regards

Louise

Replies (4)

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By johngroganjga
28th Sep 2014 22:42

You are right to dismiss group relief.

I am less sure that you are right to be so pessimistic about successfully arguing that the trade is continuous.

Thanks (1)
Stepurhan
By stepurhan
29th Sep 2014 08:47

Continuous trade

Bottling alcohol as a continuous trade is definitely an arguable position. Presumably a lot of the plant is usable in both businesses, so there is a lot of cross-over between the two. Do an exercise looking at the similarities and things that will carry on being used and you may find you have a stronger case than at first thought.

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avatar
By LTPBC
29th Sep 2014 20:03

Thanks for both of your comments. Taking your suggestions on board I will definitely look into the possibility of continuous trade.

Thanks (0)
The triggle is a distant cousin of the squonk (pictured)
By Triggle
29th Sep 2014 20:30

They've sort of been there before in Gordon & Blair (no, not those two) v CIR 1962. Although it would appear the other way around - they ceased brewing and began bottling..

http://www.accaglobal.com/ca/en/technical-activities/technical-resources...

 

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