Partnership losses to Sole Trader on cessation
Okay, so I'm aware that a partnership ceasing and being continued by a partner can be deemed as a continuing trade, which presumably means that the losses can simply be viewed as transferring over to the continuing trade, but just to check, this is all the losses, not just in the final year of the partnership, and how is this best reported in the Self-Assessment pages?
So for this particular client, there were losses to 5th April 2010 of £7k each, and losses to Dec 2010 of £7.5k each, and in Dec 10 the partners went their separate ways continuing the same trade. They both made profits to 5th April 2011, so can the 14.5k of losses be transferred over as "opening" losses on the sole trades, and how the heck is this shown on the tax return? Just leave the partnership pages as a loss carried forward and enter it as an opening loss in the self employed pages?
Pship and sole trade in same year
You will be doing a Partnership Return then for the period to December 2010 showing the split of the losses between them and the cessation date for the Partnership. Each will then have their own set of accounts from Dec 10 to 5 April 2011 and will be included on Self Employment pages. Partnership supplementary pages will also be completed for each of them showing their share of the loss to December 2010. You then show that loss as being offset against other income for 2010/11 on those Pship pages (assuming that's best) The loss will then be offset against the Self Employed profit or any other income that year. The business is treated as continuing for the purpose of basis periods but that's not an issue with a 5/4 year end in your case. E.g. If the accounts year end was December and the Partnership ceased andthe business was being continued as a sole trade then your basis period would not change from a 1/1 to 31/12 just because it became a sole trade.