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Class 4 NIC losses

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Client has 3 self-employments - total profits below personal allowance but slightly in excess of Class 4 NIC threshold.

I have done s64 claims in the past with a separate loss memoradum for IT and NIC purposes but the pupose has always been income tax offset against non Class 4 NIC income. 

In the above sceanrio is it possible to offset the class 4 NIC loss but carry forward the IT loss. Or would the IT loss need to be offset against total income to be able to utilise the class 4 NIC loss?

 

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By Adam12345
22nd Nov 2019 13:09

You have to offset the b/fwd losses against the 'first available future profits from the same trade' - the two key phases being 'first available' (even if that means wasting the personal allowance) and 'same trade'.

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dk
By SpaceDuck
22nd Nov 2019 14:09

Not sure if the same in this situation. Could carry forward the loss but was looking at offsetting against profits from other trades during the year.

But I was not sure whether I could offset the current year loss for NIC purposes against profits from other trades by only (which would reduce the class 4 nic charge to nil).

Or if I also had to offset the loss for income tax purposes to be able to offset the loss for NIC purposes.

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Replying to SpaceDuck:
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By The Dullard
22nd Nov 2019 14:12

According to HMRC you have to set it off against the other trades for Class 4 purposes, I think, but I don't believe the legislation actually bears that out.

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Replying to The Dullard:
RLI
By lionofludesch
22nd Nov 2019 14:56

The Dullard wrote:

According to HMRC you have to set it off against the other trades for Class 4 purposes, I think, but I don't believe the legislation actually bears that out.

Well, there's no point using losses against income with no Class 4 liability.

You can use the losses in the same way as you can for income tax. But you don't have to mirror the claims. You can claim income tax relief one way and Class 4 relief in another. If claiming the losses sideways for Class 4 is good for your client, you're free to do so, however you've claimed your income tax loss.

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dk
By SpaceDuck
22nd Nov 2019 14:22

That where I was getting bit confused. NIM24610 states
'SSCBA92/SCH2/PARA3 provides that a trading loss is to be relieved for NICs purposes in the same manner as for Income Tax under ITA2007/S64, S72, S83, S89, and S93.'

Goes on to say:
'To the extent that the loss has been used against income which is not liable to Class 4 NICs, relief has not been given for Class 4 NICs purposes. That part of the loss is independent of the Income Tax loss and can be carried forward against Class 4 NICs profits of the same trade. As a result, the Income Tax trading losses carried forward may be different from the NICs losses carried forward.'

The above makes me wonder if class 4 nic losses are only independent when IT losses offset against non class 4 NIC income. Therefore a IT s64 would need to be made to get Class 4 NIC s64

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Replying to SpaceDuck:
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By The Dullard
22nd Nov 2019 15:08

Have you read SSCBA 1992, Sch 2, para 3 to see if its actual words agree with HMRC's interpretation of them. I'm not sure it does, but then HMRC are responsible for how all the tax software gets coded.

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dk
By SpaceDuck
22nd Nov 2019 15:43

Thanks for that looking at point 4 looks to state where made in computing his total income for income tax purposes. So looks like IT s64 needed and any balance of class 4 c/f

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