I’ve a loss cf that I want to offset for 17/18 SA, but also will be applying for a mortgage after 17/18 tax is done so I have 2 years profit. Will putting cf loss in reduce nett profit thereby reducing mortgage vs putting cf loss against 17/18 SA and having more deposit as not paying tax? The risk of wrong answer would mean losing my flat as have to have £15k or won’t have enough to buy. I have spoken to accountant, he advised to check with mortgage advisor so seems another “grey” area that varies. I’d appreciate any input or advice as I need to get it in by deadline. I’ve waited to see if any changes happened but so far income good and it’s a much closer possibility than a year ago. Many thanks
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You have 'spoken to accountant'. Is that your accountant? If so, do what he says. Why do you think we would know the case better than him?
In my expierence lenders will just see the bottom line and decline to lend, they have no idea what losses c/Fwd are and how they change the sa302, if it were me I'd pay the tax and be sure to get accepted. I've had lenders decline because the C/A reduces the bottom line figure.
Oh dear.
Read the previous thread, if you don't yet know about loss relief. (Lucky all your clients always make profits, I guess.)
I'll read the other thread if you re-read what my post said.
I know all about loss relief, the op asked if it would affect applying for a mortgage.
And as I said, losses reduce sa302 net profit figures, as does C/A.
My point was some lenders look at the sa302 and assume the assessable is net profit, when it is not always true.
Nothing to do with understanding loss relief.
It's entirely possible that you know more about loss relief than I do, and just happen to express yourself with even less clarity than I manage. The second part of that is more of a challenge than the first, by the way.
It was your
that confused me. Pay what tax?if it were me I'd pay the tax and be sure to get accepted
Sorry bout this... seems only I wasn’t confused here, but that’s as I knew what I was asking. I should have been clearer in my question.
Thanks for your reply ... you response echoed what the accountant said to me, risky and could get messy and end in tears.
Well you won’t have two years profit if last year was loss making. The carry forward of losses is mandatory up to a certain level, you could disclaim capital allowances if applicable.
You will need to get a mortgage adviser which specialises in the self-employed and may look at the wider picture of the profitability of your business rather than just the tax you are paying. However one year’s profits may be insufficient.
Apologies ... I made a mistake. It’s 17/18 and 18/19. I’m using as both years with in profit. Loss was cf 13-17. Waiting for 2nd profit year after Apr 19 this year before trying to apply for mortgage. Sorry for confusion.
whether you claim loss relief is up to you . you could consider submitting your return without relief and pay the tax, then decide to amend or use the loss in future years (blue touch paper lit...)
Per above the use of the loss is mandatory and are you suggesting that the OP commits mortgage fraud by amending a submitted return?
duplicate now changed to answer Matrix.
i did say i had lit the blue touch paper. however i regard talk of mortgage fraud as preposterous. all the taxpayer needs to say in a letter accompanying the application is that he made a loss in a previous year and that is shown on the SA302 (sub) for that year otherwise there is a clear danger that the loss would be counted twice . it saves a hell of a lot of time and unnecessary correspondence with the lender. Of course for all we know the loss could be available to be carried back.
toolkit extract
A claim to carry back losses to an earlier year does not affect the Self Assessment for the earlier year. Although the claim is quantified by reference to the earlier year, it remains a claim for the later year as that is the year in which the loss arose. Consequently where losses are
relieved by reference to an earlier year, the tax liability for the earlier year does not change. The relief is instead calculated as a notional or 'free-standing' credit, which may be repaid or set off against other amounts due. This means that any repayment supplement will be calculated by reference to the due dates for the later year.
For further guidance see SACM11005+
ALSO we have no details of any other income taxpayer might have
Thanks so much....I confess(no surprises) that I’m confused with this!! I think your initial response echos again not to create confusion with the lenders. The bit I didn’t consider is worrying about the cf loss for another tax year. I didn’t even condider going back, but must find out if I dont use it for this profit year(and pay tax and keep mortgage clear) can I then use it against 19/20 profit to reduce that tax bill. It will mean a 2 year gap of not using it and carrying it forward. (17/18 & 18/19 won’t use it as it’s the mortgage story). This is the “grey” bit I don’t know as some HMRC says 4 years and some say until used up.
Many thanks everyone for your responses. A few points that I didn’t clarify, and apologies for my error made in saying applying for mortgage after 17/18(typo at midnight). It’s 17/18 and 18/19 I will use for mortgage. I I have no other income, PAYE etc. Sole trader only. The loss c/f is from 13-17 is £2800. HMRC says it can only be c/f 4 years but again various “grey” answers here. I do cash basis, simplified expenses and 6 Apr accounting period. If 4 yrs c/f allowed only then I may loose some of it. 17/18 is £14800 income, expenses £1300. 18/19 with no additional income(ie will be higher but for sake of ease it’s whats earned to Dec 18) is £16600 expenses £1300 which should have me at £15k nett for mortgage target by Apr 19 using these 2 years figures. If I DO put through loss c/f for 17/18 I’m below tax and can add that money for the tax bill to the house deposit pot. It may mean the mortgage lender reads the income at £10700 for 17/18 if I do and then it’s no hope, game over and back to paying 3x a mortgage on private rent. IF the SA302(I’ve never seen one so I don’t know) is clear that this is a £13500 nett for 17/18 less c/f loss that’s a different scenario and this essentially was my question. As has been suggested it’s risky in what the mortgage lender chooses to use/see. I clearly won’t use the cf loss for 18/19 as it’s just the same scenario. Every penny at this point is critical and the risks are high. It’s just me trying to pull off this miracle and as you can see I don’t earn very much at all, hence why pennies count here. I guess the only other option I’d not considered, which has been raised (thank you so much), is to loose the extra house deposit in order to pay the tax for 17/18(so I don’t use any c/f loss) so there is zero chance of a mortgage decline by ambiguity in reading figures and then use that c/f loss on the 19/20 tax bill if this can be done?. With everything crossed to try and get a roof over my head I’ll be penniless by 19/20 and could do with a reduced tax bill if the cf loss can be stretched that far ahead! The accountant gave advice without charge, I contacted him thinking an accountant would be needed in order to get the mortgage. He said usually the SA302 is all that is required but it depends who the mortgage lender uses. He said if the lender wants certified accs he can step in at that point for a fee, but first just see if I can get by with a SA302 to avoid extra expense, very kind and honest. The mortgage advisor can’t know until May 19 which lender will have best mortgage options so who it would be. I also will have more expenses for 18/19 but am choosing not to put these in so the nett income is higher. I don’t know if expenses from 18/19 can go forward to 19/20. Laptop blew up so I finally gave up and got a Mac and some other minors bills for 2018.
I apologise for creating confusion and conflict within this community, this was not my intention, nor was “trying not paying the accountant”. He wasn’t clear about it and said I should check so I assumed an accountants community would perhaps have had experience with others in the same boat as me. I found this site from the same query raised I’d referred to. Again apologies if I’m meant to be an accountant, clearly I’m not, nor pretended to be. I would not have needed this query responded to by as many in the field if there was a black/white answer and my flat wasn’t for sale. I would simply have cf the loss to reduce the 17/18 tax bill and put that money in the pot for the next tax bill instead of trying to put it in the “house deposit” pot. It’s sadened me to see how in innocence my query can create such bluntness between colleagues of a profession. I thank again everyone who has responded and helped me with honest advice and clearness in their replies which I can understand.
One minor point I think is obvious but I’ve done all my SA so have never used an accountant as not had profit to warrant it.
On the cash basis you have to include those expenses. The use of the losses brought forward is also not optional as previously mentioned twice.