The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
For restrictions relating to losses incurred by sole traders using the simplified cash basis, see the Eligibility for the simplified cash basis guidance note.
When a sole trader makes a loss, the trading income assessment (ie the taxable profit for the year) is nil. Losses are computed in the same way as profits. Loss relief is only available if the business is being run on a commercial basis with a view to realising a 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 incurred by ongoing trades (ie trades not in the first four years of trading or in the 12 months to cessation).
For a comparison of the various loss relief claims, see: Table ― trading loss relief summary.
The trader may choose how the loss should be relieved by making appropriate loss relief claims.
For continuing trades, losses may be relieved against the following:
total income of the year of loss or the preceding year
current year or preceding year capital gains, to the extent that losses cannot be relieved against current or prior year total income, and
future profits arising from the same trade
Relief for losses in the opening or closing years of a business are dealt with in the Sole trader loss relief ― opening years and Sole trader losses on cessation guidance notes.
As there are several options for relieving losses, careful planning is required to achieve the optimum position. A balance may be needed between relieving losses early and relieving losses at the highest possible tax rates. For a summary of loss relief options, see: Summary ― self-employed trading losses.
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.
See also: Checklist ― trading loss
**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
‘Hold-over’ relief allows for the deferral of a gain that would otherwise arise in relation to a disposal. No capital gains tax (CGT) is due in respect of the disposal, but the base cost of the asset for the transferee for the purpose of a future disposal is reduced by an amount equal to the gain
IntroductionUK tax must be withheld on UK payments including:•interest•royalties•rental incomeWithholding tax may be reduced under double tax treaties (DTT) or European directives, both of which may be subject to making a formal claim.This guidance note outlines the rules for UK withholding tax, and
Summary of capital allowances on carsThe current capital allowance rates applicable to cars are as follows:Pool typeDescription of carRateLegislationMain rate poolNew and unused cars with CO2 emissions over 50g/km but not more than 110g/km (to be reduced to 50g/km and below from April 2021)18%CAA
This guidance note considers the capital gains tax implications where shares are sold in exchange for new shares.The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:•new shares in the vendor in exchange for shares
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.