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Carrying back 2020/21 losses

Too soon ?

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I have a client who ceased trading in May 2020 and has terminal losses carried back to 2019/20 and 2018/19.

Obviously, I've not submitted the 2021 return yet but I have included loss claims on the 2020 return and an amended 2019 return.  At the moment, these free-standing loss relief credits don't appear on his account, leaving it looking like he owes about £3000, when HMRC actually owe him £1500.

Do I need to submit the 2021 return to get the credits entered ?  The big snag is that the £3000 is due in January 2021 and the return can't be submitted until April 2021.  He won't be able to raise the tax he doesn't actually owe anyway.

Or should I just deal with it in the traditional way, with a letter ?   Which is my instinctive reaction.

Replies (12)

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By frankfx
09th Aug 2020 22:13

SA303 comes to mind.

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Replying to frankfx:
RLI
By lionofludesch
09th Aug 2020 23:07

For the poas, yes.

But not the balancing payment.

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By Tax Dragon
10th Aug 2020 07:01

Was it correct to amend the two Returns?

Are we not in the realms of Sch1B TMA?

I owe gov.uk an apology... I recently said its version of TMA was probably more than a decade out of date. I've just looked and it looks fairly spiffing now. And yes it is Sch1B. And yes para2(3) is what I am thinking of.

See also SAM110000 et seq.

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By Tax Dragon
10th Aug 2020 07:16

You may be able to make a claim outside of a return. That would seem fair to me - seeming fair doesn't mean it's right, but read through the schedule. If so, you might get an EDP at the time of the claim. And that's what you want, to cover the future tax. (*)

(Please treat my replies as pointers. A tax trainee could give you chapter and verse. These days I only know the chapter headings for this kind of thing.)

(*) Even the later of the time of the claim and the due date for payment would do it.

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Replying to Tax Dragon:
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By lionofludesch
10th Aug 2020 09:05

Yeah, I think I'm going to have to write in.

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By Tax Dragon
10th Aug 2020 09:35

Can't see an alternative.

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By lionofludesch
10th Aug 2020 10:40

No. Really, I was just wondering whether I'd waited long enough.

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Replying to lionofludesch:
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By Tax Dragon
10th Aug 2020 10:54

Why not? If a claim is possible outside of the Return (and logic says it should be, since all the information to make the claim is available(*), trade having ceased, but a Return is not yet possible.... again, logic does not equal legislation), then... actually, I have nothing to add to the parenthesised comment! I'll shut up :-)

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Replying to Tax Dragon:
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By Tax Dragon
10th Aug 2020 12:12

Tax Dragon wrote:

A tax trainee could give you chapter and verse.

To avoid being misrepresented (now that a chapter-and-verse reply has appeared), let me be clear: the reverse is not true. I wouldn't call Basil a trainee... other than to the extent that we all are, as we continue to learn.

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By fawltybasil2575
10th Aug 2020 12:03

@ Lion.

Stand-alone claims are acceptable - please see the HMRC guidance:-

https://www.gov.uk/government/publications/losses-hs227-self-assessment-...

Indeed, for the reason given by you (ie the 2010/21 Return cannot yet be submitted), a stand-alone claim is currently the ONLY means of submitting a Terminal Loss Claim for 2020/21.

As the guidance states, one should indicate the reduction in Income Tax which arises, in respect of the earlier years, when submitting them claim. The effect of the Claim is to reduce the tax liability for the CLAIM year (ie 2020/21) notwithstanding its arising from the offsetting of the Loss against the earlier years: the guidance indeed indicates the relevant box to show the reduction in Income Tax, if such claim is made on a Tax Return.

Such being the case, it is NOT correct to ALSO show details of the 2020/21 Terminal Loss claim on the Returns for 2018/19 and 2019/20; and hence unfortunately I believe you will need to further amend/amend respectively the 2018/19 and 2019/20 Returns.

I understand that HMRC are encouraging Loss Relief Claims for 2010/21 (due to the fact that the Coronavirus pandemic is affecting businesses -perhaps your client's business has been similarly affected) and hence I believe that you should "push" HMRC for an early repayment.

Basil.

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Replying to fawltybasil2575:
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By lionofludesch
11th Aug 2020 18:47

fawltybasil2575 wrote:

@ Lion.

I understand that HMRC are encouraging Loss Relief Claims for 2010/21 (due to the fact that the Coronavirus pandemic is affecting businesses -perhaps your client's business has been similarly affected) and hence I believe that you should "push" HMRC for an early repayment.

Basil.

Thanks Basil. I will be writing in.

I don't want stuff dragging on for my successor to deal with.

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By frankfx
10th Aug 2020 17:32

https://www.accountingweb.co.uk/any-answers/the-impossibility-of-dealing...

The above link is an indicator of poor and complacent communication embedded within HMRC.

Many of us are presented with the problem of communicating with HMRC, to ensure

the right thing is done
at the right time
Efficiently so , bearing in mind the time drain when we have to pick up the pieces later down the line.

https://www.tax.service.gov.uk/shortforms/form/CeaseTrading?dept-name=&s...

You would think HMRC could allow this form to provide details of losses and tax consequences arising.

Of course the form doesn't help or even signpost a user in that regard.

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