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Loss when business starts & stops in the same year

loss claim when self employment stops

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If a self employment starts and stops in the same year can the losses be claimed?  The reason I am asking is that the business in effect continued but as a lmited company.   It could be argued that he was trading with a view to making a profit and, indeed, the company is expected to yield profits but will the fact that the corporate body is a different entity affect his ability to make the claim?  Or am I over-complicating things?

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By memyself-eye
13th Sep 2018 16:07

who (or more precisely what income/profit) are you going to claim the loss against?

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RLI
By lionofludesch
13th Sep 2018 16:52

Yes - just because the trader didn't make a profit doesn't mean he didn't have a reasonable expectation of making one. If the trade is in something dull, you've a better chance of claiming that if it's his hobby.

But, as memyself-eye says, against what income were you thinking of claiming ?

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By tonycourt
13th Sep 2018 16:55

You are asking two questions - is there a loss for tax purposes? And, If there is, how can the loss be relieved?

First question. Answer: If there was a commercial trade with a view to making a profit it doesn't matter that it ended before a profit was made or that it ended quickly. The usual subjective considerations apply and for that reason the transfer of the trade seems to me to be a helpful indicator, but it's not vital or even that important.

Second question. Answer: Yes, the usual loss relief provisions apply, opening years etc. However, if there's no income against which the loss can be set using these provisions, i.e. in the current or previous three years it can be carried forward and set against the director-shareholder's salary/benefits/dividends from the company.

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Replying to tonycourt:
By Moonbeam
13th Sep 2018 17:57

Surely it's terminal loss relief isn't it?

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Replying to Moonbeam:
RLI
By lionofludesch
13th Sep 2018 18:04

That's one of his options.

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Replying to Moonbeam:
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By tonycourt
13th Sep 2018 19:17

@moonbeam Can you say why you think that? As far as I can see the OP has three options, standard sideways loss, early years sideways loss or carry forward against the income from the company. While terminal loss relief is available in practice it's of no use as there are no earlier profits against which to set it.

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Replying to tonycourt:
By Moonbeam
14th Sep 2018 09:29

I've very little experience of losses, but thought that in this case terminal loss relief would trump the early years options. Clearly I'm wrong from what others say. I also thought terminal loss relief could be set off against other income in the current year or previous tax year.

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Replying to Moonbeam:
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By tonycourt
14th Sep 2018 09:36

No worries. I was just concerned that something had slipped into the loss relief rules which I had overlooked.

FYI terminal loss relief is specifically aimed at earlier years profits as an alternative to claiming sideways loss relief, which requires is a separate claim. If you claim one type of loss relief it extinguishes the right to claim relief under another provision.

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Replying to Moonbeam:
RLI
By lionofludesch
14th Sep 2018 09:36

What trumps everything is getting the biggest tax reduction. The biggest factor in that is what income the taxpayer has to set it against.

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By Accountant A
13th Sep 2018 17:02

What jurisdiction are you referring to? It's just that late last year you were claiming to be a USA national resident in Italy.

I suspect the rules are different in the US and Italy from what they are in the UK, as you will appreciate being an accountant yourself.

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Replying to Accountant A:
RLI
By lionofludesch
13th Sep 2018 17:26

[chuckle]

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Hallerud at Easter
By DJKL
13th Sep 2018 20:39

"While unused trading losses cannot be carried forward directly against company profits, there are the
following reliefs to enable the trader to use pre-incorporation losses:
- set off against any other income of the same year or the previous year
- a loss in the last 12 months may be set off against trading income for the 3 previous years
- set off against income derived from the company provided that the business was transferred solely or
mainly in exchange for the allotment of shares. Income derived from the company includes directors’
remuneration, dividends, interest or rent received from the company. "

Can the last one help?

http://www.aat-interactive.org.uk/cpdmp3/2012/August/Tax%20and%20VAT/Inc...

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

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