Ltd not claiming AIA

why?

Didn't find your answer?

I have a client who has always been loss making and has never claimed CAs carrying a TWDV of £400k.

This year they've made a profit. They have sufficient tax losses b/fwd to offset it, but that leaves me in a quandry re claiming CAs on the b/f and CY AIAs.

I understand why a partnership / sole-trader may choose not to claim AIAs, but why would a company choose not to?

Replies (22)

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paddle steamer
By DJKL
04th Jun 2019 15:56

In the past (possibly more than today given the recent changes re CT losses) if they had, or forecast they might have, different streams of income and or gains in the future,they might have decided upon leaving the latent tax losses in the piggy bank given the then more flexible ability to make use of current year losses over brought forward losses.

https://www.accountancyage.com/2018/02/07/corporation-tax-losses-newly-f...

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Replying to DJKL:
ALISK
By atleastisoundknowledgable...
04th Jun 2019 16:03

But there's no reason why this should continue?
(scenario caveat's acknowledged)

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Replying to atleastisoundknowledgable...:
paddle steamer
By DJKL
04th Jun 2019 16:34

To tell you the truth I am not particularly well read on the topic, it does not really arise in my day job and none of my small list of clients has really needed loss relief provisions, so maybe there are some unforeseen consequences (unknown unknowns) to be wary about.

e.g is change in control /scale of the business still an issue re restricting the future use of the carry forward losses etc?

However it does, in the round, look like any nasty consequences are probably at the margins.

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John Toon
By John Toon
04th Jun 2019 16:06

So as not to compound the taxable losses?

I agree it seems strange though (unless they are massive fans of deferred tax or didn't want to make loss relief difficult for an acquirer). Personally, I'd have claimed the AIA, even if I'd ignored WDA given the generous nature of AIA.

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Replying to johnt27:
ALISK
By atleastisoundknowledgable...
04th Jun 2019 16:21

If they were your client and would you claim the CY AIA and 18% WDA on the b/f this year?

Assume that if you asked them they wouldn’t have a Scooby-Do.

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Replying to atleastisoundknowledgable...:
John Toon
By John Toon
04th Jun 2019 16:28

My default would be to claim both, but I'd generally discuss options with clients in a similar position.

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By Vaughan Blake1
04th Jun 2019 16:50

There may have been good reasons to restrict CAS claims in the past under the old loss rules. Difficult to see why restrictions should be in place now. On the basis the company is now moving into profit, maxing the CAS claim will defer the point at which CT will become due.

Suggest a quick chat about their future plans before making a final decision.

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By Tax Dragon
04th Jun 2019 16:55

Does the company have any other income/taxable sources, or is it likely to acquire such?

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
04th Jun 2019 17:01

No.

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RLI
By lionofludesch
04th Jun 2019 18:29

We had a thread about this two or three years ago and I believe we came to the conclusion that there were a few scenarios where it was justified but they were so obtuse as to be of no consequence.

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Replying to lionofludesch:
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By Tax Dragon
04th Jun 2019 18:41

Credit where credit is due... there's evidence that atlea went a-looking for that thread.

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
04th Jun 2019 21:01

Appreciated... yes I did look for past threads.

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
04th Jun 2019 21:11

Appreciated... yes I did look for past threads. I always try to, but the search function on AW is pants. I end up googling whatever I want + ‘accountingweb’.

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By Duggimon
05th Jun 2019 09:12

Personally for 99% of clients I'd claim everything I could for this year and amend last year to claim as much as I can for that too.

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By Richard Grant
05th Jun 2019 09:15

Maybe the Directors and the person responsible for the tax returns aren't aware of AIAs and Cas? If they qualified years ago and never kept up to date this whole area may have passed them by or maybe they never knew in the first place. Or they simply have an unqualified book keeper preparing the tax return each year copying what's happened for the last 10 years.

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Replying to Richard Grant:
ALISK
By atleastisoundknowledgable...
05th Jun 2019 09:32

They've been audited in previous years ... auditors did the tax as well ...

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Replying to Richard Grant:
RLI
By lionofludesch
05th Jun 2019 09:49

Richard Grant wrote:

Maybe the Directors and the person responsible for the tax returns aren't aware of AIAs and Cas? If they qualified years ago and never kept up to date this whole area may have passed them by or maybe they never knew in the first place.

Seriously ? The whole era of AIAs and their predecessor FYAs passed them by over the better part of 60 years ?

They'd be retired now. If not dead.

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Replying to lionofludesch:
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By Richard Grant
05th Jun 2019 10:05

Maybe so but I have come across quite a few QBEs and people who were shown how to do returns without actually having a clue. I'm in France at the moment and recently spoke to someone over here who makes a good living filing tax returns for expats without any formal training. They signed up as an agent years ago and haven't a clue about CAs.

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Replying to Richard Grant:
RLI
By lionofludesch
05th Jun 2019 10:15

Richard Grant wrote:

Maybe so but I have come across quite a few QBEs and people who were shown how to do returns without actually having a clue.

A QBE who doesn't know about basic, day-to-day capital allowances isn't Qualified by Experience. They aren't qualified at all.

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Replying to lionofludesch:
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By Richard Grant
05th Jun 2019 10:24

I would agree 100%. The say they are QBE, I should have made myself clear. This case is different as it was done by the auditors.

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By Haychum Arcy
06th Jun 2019 09:53

Perhaps they were considering selling the business at some point?

Selling a business with losses is not as attractive since the MCINOCOT rules came in. However, selling a business with unclaimed CAs may be?

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Replying to Haychum Arcy:
RLI
By lionofludesch
06th Jun 2019 10:06

I'd say that having losses available now is a lot more attractive than 18% reducing balance, MCINOCOT or not.

But - that's just my pragmatism.

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