Then you need to look at your tax adjusted profit (& your tax adjusted loss for the previous year). And also whether any part of those tax adjusted losses were carried back or otherwise utilised.
Thank you for your input, Wanderer.
I have obtained a set of draft accounts from my accountant.
The operating Profit is £15,007
Profit on activities before tax is £15,007 as is Profit on activities after tax.
Retained profit for the year £15,007
Retained Loss brought forward £23251
Retained Profit or Loss Carried forward £0
I have been trading the Limited Company for approximately 3 and a half years to date and this is my first year turning a profit, in my third year of trading. In the previous 2 years the losses were carried forward to this company year. I did invest heavily in the first 2 years and business outlook is currently very promising.
I have been trading my Ltd company for around 3 and a half years, (this is my third set of accounts) I invested heavily in the first 2 years and in both years made a loss and the losses were carried forward. I am now in a good profitable position with business outlook very good.
I have spoken to my accountant on numerous occasions, on the phone and lengthy email conversation.
I have extracts from an email stating: "The losses brought forward offset your profit and the remainder of the loss can't be carried forward to the next year as it's just written off."
I did ask her reasoning in regard to the losses being 'written off', and the reply was "This is standard practice. When a loss is brought forward and the loss is greater than the profit, all the profit is offset and the remaining losses are written off."
My reply was "Thank you for your timely reply, just to help my understanding, I have £15,007 profit this year to be offset by £23,251 losses, which will leave a loss of £8244 which is written off and effectively takes the P&L carried forward figure to £0?"
Her reply. "Yes, that is correct. Can you please sign the draft accounts and return them to me as soon as possible for filing."
I put this post out there because this "standard practice of writing off a loss" just makes no sense at all to me, I have 'researched' losses brought forward but haven't found any material which states this as the correct treatment, but as I am well aware, tax legislation is significantly vast and I could very easily be missing something.
I have read some fantastic posts and exceptional replies from very knowledgeable and experienced forum users previously, who do have far superior knowledge and experience than I do and know about the finer details in the tax legislation.
I was just asking for opinions and general input from more knowledgeable users, not going on a forum "witch hunt"
Unless there are factors you've not disclosed, it's rubbish.
Check that you've not misunderstood your accountant. If you haven't, start looking elsewhere.
However, as an aside, I should say there are several situations where, as a sole trader, you are unable to get effective relief for your losses as they often interact with personal allowance. Which makes dealing with sole trader losses much more tricky.
Thanks for your input.
I am always open and honest, I sleep well at night and would like to keep it that way. I also have a part time book keeper who does a cracking job.
I double checked and an email from my accountant said "You must use all carried forward losses from previous years' accounts to 'write off' the profit and no losses are carried forward to next year. This will be good because you can draw dividends next year."
I definitely have £23,000 losses brought forward. Well, £23,251 losses brought forward.
My answers
Thank you for your input, Wanderer.
I have obtained a set of draft accounts from my accountant.
The operating Profit is £15,007
Profit on activities before tax is £15,007 as is Profit on activities after tax.
Retained profit for the year £15,007
Retained Loss brought forward £23251
Retained Profit or Loss Carried forward £0
I have been trading the Limited Company for approximately 3 and a half years to date and this is my first year turning a profit, in my third year of trading. In the previous 2 years the losses were carried forward to this company year. I did invest heavily in the first 2 years and business outlook is currently very promising.
Thanks for your input,
I have been trading my Ltd company for around 3 and a half years, (this is my third set of accounts) I invested heavily in the first 2 years and in both years made a loss and the losses were carried forward. I am now in a good profitable position with business outlook very good.
I have spoken to my accountant on numerous occasions, on the phone and lengthy email conversation.
I have extracts from an email stating: "The losses brought forward offset your profit and the remainder of the loss can't be carried forward to the next year as it's just written off."
I did ask her reasoning in regard to the losses being 'written off', and the reply was "This is standard practice. When a loss is brought forward and the loss is greater than the profit, all the profit is offset and the remaining losses are written off."
My reply was "Thank you for your timely reply, just to help my understanding, I have £15,007 profit this year to be offset by £23,251 losses, which will leave a loss of £8244 which is written off and effectively takes the P&L carried forward figure to £0?"
Her reply. "Yes, that is correct. Can you please sign the draft accounts and return them to me as soon as possible for filing."
I put this post out there because this "standard practice of writing off a loss" just makes no sense at all to me, I have 'researched' losses brought forward but haven't found any material which states this as the correct treatment, but as I am well aware, tax legislation is significantly vast and I could very easily be missing something.
I have read some fantastic posts and exceptional replies from very knowledgeable and experienced forum users previously, who do have far superior knowledge and experience than I do and know about the finer details in the tax legislation.
I was just asking for opinions and general input from more knowledgeable users, not going on a forum "witch hunt"
With Regards
Thanks for your input.
I am always open and honest, I sleep well at night and would like to keep it that way. I also have a part time book keeper who does a cracking job.
I double checked and an email from my accountant said "You must use all carried forward losses from previous years' accounts to 'write off' the profit and no losses are carried forward to next year. This will be good because you can draw dividends next year."
I definitely have £23,000 losses brought forward. Well, £23,251 losses brought forward.
Absolute codswallop yes?
Many Thanks
My apologies, this is my bottom line. Net profit.