Hi All,
One of my client who trades through Limited company now want to trade as self-employed. The nature of the business will be same. the reason for the change is to avoid too many administrative works and incurring losses and won be making any profits for at least next two years. My question is would it possible to carry the accumulated losses incurred under Limited company into his self-employed business and strike off the company? or else is it advisable to make the company dormant so as to preserve the company name and structure so that he can come back when he thinks he will make profit.
Many thanks
Replies (18)
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I agree
Losses will be surrendered on disincorporation.
Losses cannot be transferred from limited company to self employed business. Would be advisable, if the business is going to recover, to keep the company dormant. Why can't he make losses in the limited company and carry them forward against future profits? Surely the admin costs aren't that great.
Same Trade
Losses will be surrendered on disincorporation.
Losses cannot be transferred from limited company to self employed business. Would be advisable, if the business is going to recover, to keep the company dormant. Why can't he make losses in the limited company and carry them forward against future profits? Surely the admin costs aren't that great.
It's not the same trade. It's a point made several times above.
Lost
And if you make it dormant, you risk HMRC saying that you can't carry them forward because it's a different trade.
Cessation
It would not be the same trade. It would be a new trade doing the same thing. That is an important distinction with tax consequences. The only way it could be the same trade is to argue that the company continued trading (albeit not actually successfully selling anything) in the break. Running the business as a self-employment in the interim makes it clear there is a period where the company is not trading, so it is almost certain the losses would be wasted.Why its going to be different trade if he comes back and involves in exactly the same nature of trade as it was pre dormant dormant status.And if you make it dormant, you risk HMRC saying that you can't carry them forward because it's a different trade.
Based on this and previous questions, I would strongly advise you to do some serious CPD on limited companies. The very fact that you asked if the company losses could be carried over into a self-employed trade shows a lack of understanding of the fundamentals. The risk of doing your clients serious harm in this context is pretty high if you don't understand these things.
Misunderstanding?
Sorry, I must have misunderstood you when you titled your query Thank you for your reply. I know incorporated losses can not be carried forward into the self employed.
and when you said in your OP Losses carry forward to self employed
My question is would it possible to carry the accumulated losses incurred under Limited company into his self-employed business and strike off the company?
Perhaps you could explain what you meant by these, given you knew the losses couldn't be used in this way. Probably not a lot of point in offering further advice until this matter is cleared up.
Nature
Why its going to be different trade if he comes back and involves in exactly the same nature of trade as it was pre dormant dormant status.And if you make it dormant, you risk HMRC saying that you can't carry them forward because it's a different trade.
Same kind of trade but not the same trade, I'm afraid.
I don't want to gang up
But I agree with stepurhan.
Your last post on this thread shows a clear lack of the most basic of tax knowledge.
Be very careful...
Do you mind if I ask if you are employed or self-employed?
Not for me
It's not for me, I'm afraid. Trading's more than incurring a few expenses and holding the occasional director's meeting.
He is trying to cover his tracks
By claiming he already knew the answer!
Honesty is the best policy and this poster is not being honest about his knowledge.
Keep trading
The only way to retain the losses is to continue trading. The reality seems to me to be that the company has already ceased trading but this will very much depend on the facts.
Maybe
The only way to retain the losses is to continue trading. The reality seems to me to be that the company has already ceased trading but this will very much depend on the facts.
Maybe they only 'fell out with their bank manager' ?
Facts
The only way to retain the losses is to continue trading. The reality seems to me to be that the company has already ceased trading but this will very much depend on the facts.
Maybe they only 'fell out with their bank manager' ?
It very much depends on the facts.
But I wouldn't be making up new facts if the old facts don't fit.
.
The only way to retain the losses is to continue trading. The reality seems to me to be that the company has already ceased trading but this will very much depend on the facts.
Maybe they only 'fell out with their bank manager' ?
It very much depends on the facts.
But I wouldn't be making up new facts if the old facts don't fit.
I'm not sure what you're getting at.
The only fact I remember reading is the fact that they have closed their bank account
Fair enough
Fair point. It's not clear whether the trader has started trading on his own account or not.
But it does depend on facts which we don't have.