I have a question to do with company trading losses brought forward.
I have just been speaking to my accountant and I am a bit confused.
My Ltd company had losses brought forward from the previous accounting years of £23,000 to offset against future profits. My accountant has my 18/19 company accounts in draft for my company year end March 2019.
This year, my company made a profit of £15,000. My accountant has said that all the losses brought forward have to be used and no remaining losses can be carried forward to use against the March 2020 accounts profits, is this correct? Now, I am not an annoying client who questions everything a trained professional says, but it doesn't make sense the remaining £8,000 of the loss just disappears. I can find no evidence this is the case and when I was a sole trader I certainly had losses carried forward 2-3 years to offset against trading profits.
In summary, my accountant has said the £23,000 loss carried forward, take away the £15,000 March 2019 profit leaves an £8,000 loss that can't be carried forward to ofset profits in the March 2020 accounts?
Any advice would be appreciated.
Thanks in advance
Replies (31)
Please login or register to join the discussion.
Unless there are factors you've not disclosed, it's rubbish.
Check that you've not misunderstood your accountant. If you haven't, start looking elsewhere.
However, as an aside, I should say there are several situations where, as a sole trader, you are unable to get effective relief for your losses as they often interact with personal allowance. Which makes dealing with sole trader losses much more tricky.
......and an email from my accountant said "You must use all carried forward losses from previous years' accounts to 'write off' the profit and no losses are carried forward to next year. This will be good because you can draw dividends next year."I definitely have £23,000 losses brought forward. Well, £23,251 losses brought forward.
Absolute codswallop yes?
Many Thanks
Well, two points.
Firstly, as noted below, accounting profit and taxable profit are two different things. This year's accounting profit may be £15,000 but the taxable profit may be £23,000+. You need to check this.
Secondly, your ability to draw dividends has bu99er all to do with your taxable profit and the use of losses and everything to do with your accounting profits, including any not distributed in earlier years.
You need a chat with your accountant.
I have just been speaking to my accountant and I am a bit confused.
Any advice would be appreciated.
Get a new accountant.
Before you get a new accountant, talk to your existing one. There's a high chance that this is a (simple) miscommunication/misunderstanding.
Then you need to look at your tax adjusted profit (& your tax adjusted loss for the previous year). And also whether any part of those tax adjusted losses were carried back or otherwise utilised.
^ This.
The thanks the accountant gets for utilising losses is his (or her) client comes in here and wonders where the losses have gone. (And it's sad that the immediate response is "get a new accountant".)
OP, you won't get your answers in here, you'll get them from your accountant. Call him/her.
^ This.
And it's sad that the immediate response is "get a new accountant".
There's no need to get a new accountant yet.
There's scope for misunderstanding here. Few laymen will understand the distinction - and significance - between accounting and taxable profit.
That more detailed background explanation (combined with the dividend comment - as Lion said, that seems a non-sequitur) does make me wonder about the competence of your accountant.
This is accounting profit which is different from tax adjusted profit. Accounting profit affects dividends, tax adjusted profit affects tax.Retained profit for the year £15,007
Retained Loss brought forward £23251
Retained Profit or Loss Carried forward £0
If you draft accounts show what you have said then this again is absolute rubbish.
The operating Profit is £15,007
Profit on activities before tax is £15,007 as is Profit on activities after tax.
Retained profit for the year £15,007
Retained Loss brought forward £23251
Retained Profit or Loss Carried forward £0
Jaysus - that's worse rubbish than I expected ! The lass is trying to blind you with science, if you'll pardon the pun.
Where did the other £8244 in losses go ? Do the accounts balance ? The one thing layman expect accountants to be able to do is add up, take away, times and share.
Time to seek a second opinion, I think.
Whatever you do, don't sign off those accounts or the related Corporation Tax return. Or pay her.
The one thing layman expect accountants to be able to do is add up, take away, times and share.
Isn't that four things? :-)
If there was just one thing, it'd be to know whether two numbers are the same. As you say, how does anything balance here?
The one thing layman expect accountants to be able to do is add up, take away, times and share.
Arf, arf.
I've amalgamated them under the collective of "arithmetic".
When did we start calling "multiply" and "divide" "times" and "share"? Are you perhaps Benjamin Button, just reached primary school?
When did we start calling "multiply" and "divide" "times" and "share"? Are you perhaps Benjamin Button, just reached primary school?
The senior partner of my first accountancy employer said to me on my first day, "As long as you can add up, take away, times and share, you'll be grand."
It's always stuck with me.
@ For_Science do you have a copy of the Corporation Tax Computation? Or if not the Corporation Tax Return?
We’re looking for:
1. Taxable profit for the year
2. Tax losses brought forward
EDIT:
Would be interesting to know the above, but just see the posts about the £23k accounting loss add £15k accounting profit equalling £nil.
What the hell has she done with the other £8k?
There wasn’t another company that gave you £8k was there as a ‘capital contribution’?
Reading all their posts I don't think the OP has been looking at the tax loss at all. Think they've been talking about the accounting position only.
Reading all their posts I don't think the OP has been looking at the tax loss at all. Think they've been talking about the accounting position only.
Wouldn't surprise me. I said earlier that laymen don't understand the difference.
It's still wrong, though.
Reading all their posts I don't think the OP has been looking at the tax loss at all. Think they've been talking about the accounting position only.
I was just wondering whether the OPs (on the face if it) carp accountant was (worryingly) getting herself confused somehow.
<I was just wondering whether the OPs (on the face if it) carp accountant was (worryingly) getting herself confused somehow.
How confused do you have to be to think £15k - £23k is zero ?
And where did the £8k go ?
But I agree that the OP doesn't seem to grasp that tax losses aren't the same as accounting losses.
“How confused do you have to be to think £15k - £23k is zero ?”
I meant by mixing her figures. Maybe accounting losses b/f, CY tax profit ... agree given her emails it seems it’s far more likely that she just doesn’t have a clue and is costing her clients £000s in unclaimed losses.
You don’t really have any option other than to pay a second accountant to review your last 3 years accounts and returns. If (as seems very possible) your current accountant is incompetent then there are likely to be many issues and knowing this now is better than finding out down the line. If a new accountant does find issues then you can seek to recover the fees paid to your current accountant. Is your current accountant part of a professional body?