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Partnership losses on death

Partnership losses on death

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My client was a husband and wife partnership, the wife died leaving partnership losses brought forward on her tax return. 

I have looked at applying termination loss relief, but the partnership has made losses in the past, he position is as follows:

2010/11 -Loss £18,044

2011/12 - Loss £14,512

2012/13 - profit £18,729

Leaving losses b/fwd £13,827

The husband has other income for which these losses could be really useful to offset against.

Is there anything I can do? With hindsight I would have discussed changing the profit share with them.

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Euan's picture
By Euan MacLennan
08th Jan 2015 14:38

Losses die with the wife

When did she die?

Her losses brought forward from 2012/13 will be available against her share of the profit, if any, for 2013/14, so you could amend the 2013/14 profit share to give her (up to) £6,914 (or £13,827 if your figures were for each partner), which would obviously save the husband some tax.

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RLI
By lionofludesch
08th Jan 2015 15:03

No carry forward

Yeah - she's not going to be carrying these forward, I'm afraid, so you need to allocate more losses to the husband.

 

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Replying to fawltybasil2575:
By johngroganjga
08th Jan 2015 15:32

Agreement?

lionofludesch wrote:

Yeah - she's not going to be carrying these forward, I'm afraid, so you need to allocate more losses to the husband.

Always assuming that it's in the husband's interest to transfer assets into the wife's estate.  Not a problem if they all come back to him as her beneficiary, but possibly a problem if her will sends them elsewhere. 

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By Tim Vane
08th Jan 2015 15:12

@lion

How can losses be allocated to the husband as the 2012 return is out of time for amendment?

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Replying to Roland195:
RLI
By lionofludesch
08th Jan 2015 15:46

With difficulty

Tim Vane wrote:

How can losses be allocated to the husband as the 2012 return is out of time for amendment?

I believe the proverbial boat may have been missed. Although the possibility of shunting more 2013 profit to be covered by the loss remains - for three weeks or so.

There's not enough information here.  As hinted above by John, one of the key issues may well be what happens to her estate.  It's not purely a tax issue.

Unfortunately, the OP is fire-fighting here.

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By mjcaccount
09th Jan 2015 12:22

Thank you all for you responses.

All of the assets within the estate have transferred to the husband.

I will be discussing with him today.

She died on 5th May, so it doesn't leave us much to play with for 2013/14.

However, I will discuss amending the 2013 accounts & tax return showing an amendment to the profit sharing ratio, but I'm guessing HMRC may see through this and raise an enquiry?

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RLI
By lionofludesch
09th Jan 2015 15:39

What year ?

5th May ...... what year ?

If  2013, you're fine.  You can split the profits how you want.  The only thing you can't do is give one partner a profit and the other a loss.

I've only known HMRC challenge a profit split once - about 30 years ago - and the wet-behind-the-ears Inspector backed off on reply 1 because he'd got it very badly wrong.

 

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