Claim 17/18 & 18/19 losses to offset 20/21 gains?

Carrying forward historic capital losses

Didn't find your answer?

I am not an accountant, but hopefully someone can point me in the right direction.

I am trying to rectify a situation whereby in 20/21 I made capital gains on crypto trading totalling £26,000. Back then I was ignorant about when capital gains tax was paid (I incorrectly thought it was when I moved the funds back to my bank account - I was wrong). I am now trying to make this right with HMRC, and hence hired an accountant to help me fill out the returns. I am aware I will have to pay a penalty and interest (I have all my trade documented).

My gains and losses are as follows:

17/18 - loss of £1,500

18/19 - loss of £1,500

20/21 - gain of £26,000

The accountant is telling me that he can file a paper return with HMRC to notify them of a £1,500 loss in 17/18 and 18/19 (each year). He explained that this £3,000 loss can then be carried forward to reduce my tax liability on the £26,000 (where I would pay 20% above the allowance of £12,300). 

However, other accountants have said this is not possible, because you have to notify HMRC of any losses within 4 years of this taking place. The accountant I am working with advised me as follows: "If the return has not been filed and you want to use prior losses after the four years when not claimed in a tax return, then you can't do that. In this case we will be filing the tax returns with the losses in of which will be carried forward. I have completed this multiple times. If we were not to file, the 17/18 return then the losses cannot be used for the 20/21 return."

Can someone please tell me what is the correct course of action? Is the accountant, right? Can I still notify HMRC on those losses and carry this forward? If he is not right, how was he able to do this with other clients?

Also, if I do try and claim the losses from 18/19 and 19/20, and HMRC do not agree with my tax return, will they penalise me? I want to pay the right amount of tax, but I don't want to get any further penalties

 

Replies (15)

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By David Ex
16th Jun 2024 14:07

If you want a second opinion, you’ll have to pay for one.

You need an accountant.

https://find.icaew.com/

Other professional bodies are available.

https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers

“If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”

“They are not here to provide free accounting advice.”

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By FactChecker
16th Jun 2024 14:07

Only your final question has an easy, clear answer ...
Q: "Also, if I do try and claim the losses from 18/19 and 19/20, and HMRC do not agree with my tax return, will they penalise me?"
A: No.

For all the other parts (where we don't have sufficient detail anyway) that are specific to your circumstances ... they are why you appoint an accountant.
If you don't trust your accountant then that's not a promising relationship, but feel free to get a second opinion from another accountant.
But opinions from unknowns on a public forum aren't really going to help you to decide whether or not to trust your current accountant!

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By Matrix
16th Jun 2024 14:20

You don’t need to complete a tax return to notify HMRC. Surely you are no worse off as the foregone tax saving on the losses is less than the fees saved from not having an adviser all these years?

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Replying to Matrix:
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By kim.shaw-and-co.com
16th Jun 2024 22:10

..

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By Not Anonymous
16th Jun 2024 14:43

And maybe try to stick to one version of events.

At one point you have losses in 17/18 and 18/19.

Later you have losses in 18/19 and 19/20.

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By kim.shaw-and-co.com
16th Jun 2024 22:11
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By jvenegas16
17th Jun 2024 01:29

Claim for your loss by including it on your tax return. If you’ve never made a gain and are not registered for Self Assessment, you can write to HMRC instead.

You do not have to report losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset.

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Replying to jvenegas16:
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By kim.shaw-and-co.com
17th Jun 2024 01:38

jvenegas16 wrote:

Claim for your loss by including it on your tax return. If you’ve never made a gain and are not registered for Self Assessment, you can write to HMRC instead.

You do not have to report losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset.

The losses arose more than 4 years ago. The accountant (reportedly) engaged by the OP is suggesting they can be captured by filing a SA return voluntarily for the earlier years (over 4 years prior to now) in which they arose that includes them, thereby (it is suggested) circumventing the time limits which apply to claims for capital losses arising in past years.

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Replying to kim.shaw-and-co.com:
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By alexnovz
17th Jun 2024 08:10

Hi, yes you hit the nail on the head. The accountant is saying that by filing a paper tax return for 17/18 and 18/19 (which are over 4 years), then this can be used to claim the losses against the gain from 20/21. Is this actually allowed?

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By alexnovz
17th Jun 2024 08:33

I also posted this question on the HMRC forum, and below was their response. On the one hand, they say it's too late. On the other hand, they say that when I make a claim for the gain, to make a claim for the losses and these will be reviewed to see if acceptable. Does this mean then that I can claim for the losses in 17/18 and 18/19?

"You have 4 years from the end of a tax year, to claim losses on income or capital gains and this must be done in writing, when not claimed in a tax return. Where the 4 years have elapsed and losses have not been claimed, it is then too late to claim for them.

When completing your tax return to declare the gain, please include separately, a claim for losses for those earlier years, along with supporting evidence, such as calculations. This will need to be reviewed separately from your tax return, to ensure that they are allowable."

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Replying to alexnovz:
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By FactChecker
17th Jun 2024 09:01

As usual, the HMRC forum has provided accurate if unhelpful answers. In this case, more helpful than often - but open to misinterpretation if you are trying to read a particular outcome into it.

"This will need to be reviewed separately from your tax return, to ensure that they are allowable" ... is factually correct (i.e. that is their process), but note the final 6 words.
If instead those words were "to check if they are allowable" (which is what they mean) then you may have a better indication of the likely outcome (bearing in mind the first paragraph).

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Replying to FactChecker:
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By alexnovz
17th Jun 2024 09:53

Apologies, I'm struggling to follow you. Can you explain that again please?

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Replying to alexnovz:
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By Tax Dragon
17th Jun 2024 10:06

I would read the HMRC response as meaning don't put the losses in your tax return, as you are out of time to claim them under self assessment, but write in separately about the losses and HMRC will consider allowing the losses.

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Replying to Tax Dragon:
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By FactChecker
17th Jun 2024 11:03

Similar(ish) to my reading too, but I'm either stricter or more cynical ...

Para 1: "You have 4 years from the end of a tax year, to claim losses on income or capital gains and this must be done in writing, when not claimed in a tax return. Where the 4 years have elapsed and losses have not been claimed, it is then too late to claim for them."

My reading?
- You can *only* claim losses on income or capital gains for tax years for which 4 tax years have NOT elapsed since then;
- IF you wish to claim such losses (within that window), then you can do so either via your tax return or by writing to HMRC.

Para 2: "When completing your tax return to declare the gain, please include separately, a claim for losses for those earlier years, along with supporting evidence, such as calculations. This will need to be reviewed separately from your tax return, to ensure that they are allowable."

My reading?
- Further (rather vague) instructions on 'how to' submit a claim when done outside of your tax return;
- Followed by the caveat that the claim (and associated evidence/calculations) will be checked by HMRC with regard to whether or not the claim is allowable.

BUT nothing in Para 2 IMHO overrides Para 1 ... so for OP the claim will be out-of-time UNLESS his accountant's 'trick' works.
It shouldn't, but who knows with HMRC's poor track record of spotting things?

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Replying to alexnovz:
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By FactChecker
17th Jun 2024 11:13

See my response to TD at 11:03 (which confusingly comes before this on this now convoluted thread) - which hopefully makes clearer my perspective.

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