Offsetting part of a loss

Offsetting part of a loss

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Suppose an individual has Self employed income of £15,000 and a Partnership loss of £9,000 for 2012/13.

I know that the Partnership loss can be set against the Self employed income but can I allocate just £6,895 of the loss against the 2012/13 Self employed income and then carry forward the remaining £2,105 loss to set against future partnership profits. Or do I have to allocate the whole of the Partnership loss and lose part of the Personal Allowance?

Thank you 

Replies (7)

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Stepurhan
By stepurhan
30th Jan 2014 09:03

Suppose?

Actual scenario or study question?

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Replying to johngroganjga:
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By Pacenote
30th Jan 2014 10:06

Actual scenario

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By pjones
30th Jan 2014 10:09

All or nothing

Loss of personal allowance cannot be avoided

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By DMGbus
30th Jan 2014 11:56

Waive capital allowances + other options

Agreed personal allowances get lost with the quoted figures by same year set-off claim.

One option is to reduce capital allowances in one or both businesses to increase the profit in the sole trader and reduce losses in the partnership.  Then some (maybe even all) of the otherwise lost Personal Allowance can be retrieved.

In a close family members partnership (eg. father and son, wife and husbanD0 the allocation (share of profits) can be adjusted by mutual agreement - sometimes this helps.

In some cases losses can instead be carried back against earlier years' profits / income - another option worth investigating.  Particularly relevant to fairly new businesses but also relevant to established businesses in some instances.

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By DMGbus
30th Jan 2014 11:58

Class 4 NIC

It used to be the case, I expect still is the case, that loss relief can be looked at separately for Class 4 NIC from Income Tax.

So losses for Income Tax might be carried back, current year set-off or carried forward, whilst Class 4 NIC losses can be dealt with in a different way.  This is a further factor to consider.

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By Pacenote
30th Jan 2014 13:13

 

 

Thanks for the replies. Are you all saying that I am not allowed to use part of the loss this year and part carried forward then? Is it a case of all or nothing?

 

Thanks

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By DMGbus
30th Jan 2014 13:42

All or nothing

Losses are claimed in full in one way or another. 

Yiou can't say "I want to claim £ x of my losses in this way and £ y in another way".

 

See HMRC helpsheet HS227 for further guidance.

 

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