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Corporation Tax losses

Corporation Tax losses

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I have a limited company client that have made a lot of losses and he wants to close the company down. He now has a business in his own name which is very profitable, same business as limited company, and he wants to know how he can use these losses to reduce his current taxable profits. He doesn't want to use his old limited company because the name brings back bad memories and because of the tie up with another company that was trading fraudulently. As anyone any ideas of how to extract these losses so that he can use them against his current profitable business in the same trade?

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18th Apr 2016 12:30

.

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14th Apr 2016 09:54

NO

cheekychappy wrote:

Is this client you? Because your story sounds very familiar.

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14th Apr 2016 10:14

no

cheekychappy wrote:

Is this client you? Because your story sounds very familiar.

I have a lot of clients and many of them, in this area of Lincolnshire, have several businesses. This client is an haulage contractor and I am an Accountant. If you noticed there is a lot of difference the former is a trade and the latter a profession.
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14th Apr 2016 10:23

No, he can't.

You can't use someone else's tax losses.

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14th Apr 2016 10:34

reply to lionofludesch

lionofludesch wrote:

No, he can't.

You can't use someone else's tax losses.

He is now a sole proprietor running the same trade with the same customers and suppliers and staff has his previous limited company business. He was the sole director and only shareholder of limited company client. Unfortunately the company was involved with this other company who committed a massive fraud with their VAT and PAYE. Has a result my client's limited company suffered a £500,000 plus bad debt because the OP company was wound up and the HMRC took all the assets to pay for the fraud. There must be some way round this so that my client can use these losses. He has paid over £100,000 VAT on this as well as a similar figure in Corporation tax and he cannot get the tax back by carrying the losses back.
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18th Apr 2016 12:31

.

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14th Apr 2016 10:40

Still no

As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.

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14th Apr 2016 10:44

I thought so

stepurhan wrote:

As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.

but I don't think my client is going to be too happy. The only thing I can do is to refile the final company accounts and carrying the bad debt through to his new sole proprietor business.
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By birdman
14th Apr 2016 10:48

What!!

Your client's only possible "bad debt" would be his DLA, and you can't carry that across. Surely he wasn't trading with the Company?

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14th Apr 2016 10:56

reply to birdman

birdman wrote:

Your client's only possible "bad debt" would be his DLA, and you can't carry that across. Surely he wasn't trading with the Company?

His new business carries on the business of his limited company. The company's final balance sheet was transferred over to his new business as Capital Introduced. Just completing the new business's accounts so I will reduce his Capital Introduced and debit bad debts. It will not show up to HMRC because his turnover is £25 million. These will be the only accounts as a sole proprietor as he has formed another limited company.
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By birdman
14th Apr 2016 11:08

Of course

How silly of me to miss this! Now just remind me, what were you actually asking, or have you only just remembered this simple solution yourself?

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14th Apr 2016 15:11

The answer is no

birdman wrote:

How silly of me to miss this! Now just remind me, what were you actually asking, or have you only just remembered this simple solution yourself?

The client wouldn't go along with my idea and thought there might be another way round it. However he still won't go with it so I have charged him £5,000 for my work so far and when it clears he can have his books back and be on his way to find another unsuspecting accountant. I might send him your way Stephurhan and you can MLR him.
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14th Apr 2016 17:02

His Turnover is 25 million!

rumpelstiltskin wrote:

 It will not show up to HMRC because his turnover is £25 million. These will be the only accounts as a sole proprietor as he has formed another limited company.

In one of you other posts you have intimated that you tend to deal with smaller companies and tax return type clients and you'd given up your ACCA and AAT memberships.  What on earth made you decide to deal with a client of this size?  Its not beyond the realms of possibility that a client this size would need other services and capabilities which you are not placed to deliver.  Whilst you say he's temporarily acting as a sole trade and I appreciate we don't know the balance sheet positions or employee numbers there must be a high chance he'd be breaching audit thresholds at some point.

 

 

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14th Apr 2016 10:51

Really?

rumpelstiltskin wrote:

stepurhan wrote:

As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.

but I don't think my client is going to be too happy. The only thing I can do is to refile the final company accounts and carrying the bad debt through to his new sole proprietor business.

Let us for the moment ignore the rewriting of history that this would require, or whether amending the company accounts to show as receivable a debt known to be bad is false accounting.

How is the sole trader to pay for this £500,000 asset you are now proposing to transfer to them? Legal separation of company and individuals remember.

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14th Apr 2016 10:58

see next posting

stepurhan wrote:

rumpelstiltskin wrote:

stepurhan wrote:

As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.

but I don't think my client is going to be too happy. The only thing I can do is to refile the final company accounts and carrying the bad debt through to his new sole proprietor business.

Let us for the moment ignore the rewriting of history that this would require, or whether amending the company accounts to show as receivable a debt known to be bad is false accounting.

How is the sole trader to pay for this £500,000 asset you are now proposing to transfer to them? Legal separation of company and individuals remember.

it will answer your question.
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14th Apr 2016 11:03

Not even close

rumpelstiltskin wrote:
it will answer your question.
The following posting doesn't even come close to answering my question (only dealing with how the asset gets into the sole trader, not out of the limited company. Just "transferring out" the balance sheet is not an answer in isolation, as you would know if you were a professional accountant)

However, since the following post also contains a sentence implying you are happy to defraud HMRC (on the grounds your client's turnover is too big for them to notice) then there seems little point in pursuing the correct treatment a professional would apply.

You might want to consider filing a MLR report on both this client and yourself if you go ahead with this.

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By birdman
14th Apr 2016 10:46

And thrice nay!

stepurhan wrote:

As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.

 

Exactly - it's why he's running a profitable Company now rather than hauling himself out of bankruptcy, so he should be counting his blessings.

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14th Apr 2016 11:41

This I think now brings a conclusion to my posting.

Problem solved, many thanks to all who replied.

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14th Apr 2016 14:32

Bless me !!

We get some cracking threads on here.

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14th Apr 2016 15:14

Gosh. Did I just witness a crime being committed, right in front of my eyes?

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18th Apr 2016 20:03

What I would do

would be for your client's company to invoice the losses, may be as Work in progress, to his sole proprietor business. That gets rid of the limited company losses and then offset the WIP against the sales of his nrew business. Problem solved. Just one more problem and that is that the company probably should have been audited so you may have to ask an auditor to put the change, through limited company accounts, as it appears you are not qualified to do so.

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