Any help with sole trader losses best use?

Sole trader loss making & wanting to maximise use of losses

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Hi,

Looking for some help on loss relief, please:

Small sole trader, with employment income as main job, but has also been doing odd maintenance jobs part time for the last 4 years. Other than one year, where they had a small profit, sole trader business has been loss making. No maintenance jobs been done so far for 20/21 & considering closing down. Accounts are made up to 5 April each tax year:

16/17 tax adjusted p/(l) (£3,400)

17/18 tax adjusted p/(l) £500

18/19 tax adjusted p/(l) (£300)

19/20 tax adjusted p/(l) (£900)

All returns submitted apart from 19/20 which is being worked on now. The 17/18 profit was reduced to £nil by using £500 of the losses brought forward from 16/17. Everything else has been carried forward, i.e. never set off against other income.

Can the 19/20 losses be offset against 19/20 other income?

Can the 18/19 losses be offset against 18/19 other income by going back & amending the 18/19 return?

Is the balance of the 16/17 losses brought forward going to be lost if the business never becomes profitable or therefore closes down?

Thank you.

 

Replies (4)

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By Anonymous.
24th Nov 2020 15:18

FIMCo wrote:

Accounts are made up to 5 April each tax year:

16/17 tax adjusted p/(l) (£3,400)

17/18 tax adjusted p/(l) £500

18/19 tax adjusted p/(l) (£300)

19/20 tax adjusted p/(l) (£900)

Are you sure that HMRC won't challenge the suggestion that the activities amount to a trade?

You would probably be better to discuss this with an accountant to ensure the facts are correctly interpreted in submitting returns.

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By John R
24th Nov 2020 17:28

"Can the 19/20 losses be offset against 19/20 other income?" Not if cash basis has been used. Otherwise, yes or against 18/19 (and, if more advantageous, consider a s.72 Income Tax Act 2007 carry back claim).

"Can the 18/19 losses be offset against 18/19 other income by going back & amending the 18/19 return?" Not if cash basis has been used. Otherwise, yes or against 17/18 (and, if more advantageous, consider a s.72 Income Tax Act 2007 carry back claim).

"Is the balance of the 16/17 losses brought forward going to be lost if the business never becomes profitable or therefore closes down?" Yes

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By NicoleM
24th Nov 2020 19:27

opening year losses apply to first 4 tax years of trading ITA 2007 ss 72-74

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By NicoleM
24th Nov 2020 19:28

opening year losses apply to first 4 tax years of trading ITA 2007 ss 72-74

sorry glass of red - posted twice in error, can't seem to delete!

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