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?
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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...
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.
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.
My default would be to claim both, but I'd generally discuss options with clients in a similar position.
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.
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.
Credit where credit is due... there's evidence that atlea went a-looking for that thread.
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.
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.
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.
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.
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.
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.
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?
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.