Is a return required?
A client employee has had income from property below £10k (profit <£2.5k) for 5 or 6 years.
He has never completed a return and a rough calculation shows losses of £5k.
For 2010/11 the income remains below £10k but the profit before deducting losses is £3k.
Questions:
Is a return required for 2010/11 even though there will not be any taxable income?
If so do we book the calculated losses as b/fwd on the first return?
What do we put on the SA1? If we put the date that the property income started, would this generate earlier year returns?
On the basis that the calculations need doing anyway (eventually) - do you advise people with property income to complete returns even if they are below the £10k/£2.5k thresholds?
Thoughts appreciated.
Answers
No - a 2010/11 tax return is not required if all the net letting income for the year is covered by losses brought forward.
N/A - but you would indeed need to disclose the losses b/fwd on the first tax return which you do need to submit.
The required statement on form SA1 is "I have been getting income from land and property from dd/mm/yy". If you draw the reasonable conclusion that this means the first year in which a net profit is made on the letting, this will avoid any possibility of returns being issued for the earlier loss making years.
Yes - the calculations need to be done for every year and if there is £1 of net taxable income, a tax return is required by TMA 1970. Any guidance on the HMRC website that returns are only required if the profit is more than £2,500 is no more than a statement of their practice - it is contrary to the law.