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Trading Losses - 3 Year Carry Back

Trading Losses - 3 Year Carry Back

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Just submitted a return with a large 13/14 trading loss. After sideways relief for 13/14 against other total income there were unused losses available to carry back against total income (excluding capital gains I believe) to 10/11, 11/12 and 12/13. Total income for 10/11 was totally extinguished and the balance of losses set against some of the income for 11/12.

Since 11/12 included a small amount of employment income but a much larger trading profit upon which class 4 had been paid, does anyone know how the offset is apportioned?  Unless I've missed something there could be a difference in tax relief dependent upon the offset due to class 4 only applying to the trading profits.


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01st Feb 2015 10:36


Class 4 losses are subject to separate but analogous claims to Income Tax.  You don't have to make the same claim for Class 4 NI as you do for Income Tax - indeed that may not be possible. It is common for Income Tax losses to be claimed against employment income against which Class 4 losses cannot be claimed.

When deciding how to use your Class 4 losses, forget income tax and start with a blank sheet of paper. You don't have to carry back although it sounds like it may be the best option. If I've understood you correctly, the Class 4 loss will be carried back to 10/11 (where there was no trading income) and then 11/12 where, presumably, it will all be relieved.

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01st Feb 2015 11:04


Lion. I think I need to clarify. The effect of carrying back trading losses to 10/11 will be to completely extinguish 10/11 taxable profits. Presumably any tax or class 4 already paid for that year will be refunded. I was observing that for 11/12 tax has already been paid on admittedly a tiny amount of employment income although most of that year's taxable income comprised trading profits.

If class 4 is not refunded in the carry back rules then you've answered my question. But I've not come across the concept of "class 4 losses". Indeed for 13/14 the sideways relief calculation included a large adjustment (downwards) for a class 4 reduction in box 102 of the SE supplement. I believe this box is for a number of different scenarios one of which is to cater for combining two or more businesses.



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01st Feb 2015 11:48

Suppose ....

Suppose your Class 4 loss is £20000

Suppose your 10/11 profits are £15000.

You set the loss firstly against that £15000, leaving £5000 to set against 11/12.

Not sure how you see it differing from the income tax claim - except that you're only dealing with trading profits and not the taxpayer's entire income.

Some numbers would help, rather than vague words like "large".

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