The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
When a sole trader or partnership makes a loss, the trading income assessment (ie taxable profit for the year) is nil. Losses are generally computed in the same way as profits. Loss relief is only available where a business is run on a commercial basis with a view to realising profit. The loss relief claim(s) that are available depend on whether the trade has started within the last four years, is a continuing trade or the trade has ceased.
This guidance note concentrates on claims that can be made for trading losses arising in the first four years of the trade. For a comparison of the various loss relief claims, see the Table ― trading loss relief summary.
HMRC has published a toolkit entitled Income tax losses, which aims to help reduce errors on tax returns. Use of HMRC’s toolkits should be proof of reasonable care.
For restrictions relating to losses incurred by sole traders using the simplified cash basis, see the Eligibility for the simplified cash basis guidance note.
Losses incurred in the course of carrying on a trade, profession or vocation in the first four years of trading can be relieved against the trader’s other income of the three tax years preceding the year of loss.
As an example, if a trade commences on 1 January 2021 (ie in 2020/21), the special loss relief will be available in respect of losses sustained in 2020/21, 2021/22, 2022/23 and 2023/24. Trading losses in each of these years can be carried back for three years.
Relief is not given automatically; a claim must be made by the first anniversary of 31 January following the year in which the loss arose (ie 31 Januar
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
There are several sets of provisions in the Taxes Acts which relate to ‘close’ companies, most of which are anti-avoidance measures aiming to catch transactions between those companies affected and their owners, where there may otherwise be a tax advantage. Broadly speaking, most owner-managed or
This guidance note explains how to calculate the amount of tax that arises under the lifetime charge. In general terms the lifetime charge will apply to individuals who transfer property into a trust that is subject to the relevant property regime. See the Chargeable transfers and Occasions of
Many people work from home either on an informal or a full-time basis. These people can be employed or self-employed, and their employment status affects the expenses they can claim as a deduction from their earnings.When dealing with someone working from home, it is important to remind him that
The rent-a-room scheme was introduced in the early 1990s to encourage homeowners to take in lodgers.Fundamentally, the rent-a-room scheme is a relief which means that the rent received by an individual from a lodger (up to a prescribed limit) can be exempt from income tax. If the gross rents are
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.