Tax return- Help!

pinoyLiz

Hello,

Q1:

Started business Jan 2008. For Tax year 2007/08 income is only £100.00. Less expenses I made a loss. Can anybody help me understand how the loss be offset or written off for tax purposes? Do I still need to fill in Tax return form? :crying:

Q2:

This creates an overlapping profit/loss right? so How would I assess the tax for this if it's loss?:crying:

Q3:

Is it possible to submit tax for year 2007/08 (Jan-April) together this the 2008/09 tax year?

I thought I understand most of this but guess not (still confuses me!!):crying:

Your help will be greatly appreciated.

Kind regards,
Liz

taxing-times

Hi Liz

1. There are a number of things you can do with a trading loss. You can offset them against current year income, carry them back to offset against previous years, or carry it forward to offset against future trading losses. Because of your situation (first year trading) you can also carry them back three years. You should choose the option which will save you the most tax, and it is usually best to offset it earlier rather than later.

Also, remember that although you are offsetting the loss for tax purposes, you are not for Class 4 NI purposes, so you carry the loss forward to offset against future profits to reduce the future Class 4 NIC liability.

2. 'Overlaps' only arise with profits, so as you have made a loss it does not need to be taken into account.

3. You still need to submit self-employed pages for 2007/08. If you make accounts up to 5 April 2008, then this is what goes onto your Tax Return. What date do you plan on making your accounts up to each year?

pinoyLiz

Hi Taxing-times :001_smile:

Thanks for the help. I am going to draw my accounts on Dec 31 this year. I am newly self-employed and the HMRC hasn't given me my tax reference number yet and it's been 5 months now. I ought to call them later though.


Let me make it clear if I understood it right.

After drawing my final account on Dec I'll then calculate my tax for year 2007/08 from Jan-April 05, 2008 profit?

How about the 2008/09 tax year? should I do the same? base on the 12 month profit?

Appreciate your help,

Liz

taxing-times

Hi Liz

As you are drawing up your first accounts to 31 December 2008, it may be wise to submit a provisional 2007/08 Tax Return, save you having to rush to meet the 31 January deadline next year (assuming you are filing online).

Once you have the figures for p/e 31.12.08, you will prorata the tax adjusted profit for the period trade began to 05.04.08.

e.g. if you commenced trading on 01.01.08, accounts to 31.12.08 and have a profit of £12,000, then the taxable profit for P/E 05.04.08 will be roughly 3/12 X £12,000 = £3,000.

For the second year you need 12 months profit. If you commenced trading on 01.01.08, then fine this will be the y/e 31.12.08. If you have a profit, you will have overlap profits too. This will be the profit charge for the p/e 05.04.08 (basically it is being tax twice).

pinoyLiz

Just wondering why HMRC hasn't send me a tax return form yet for 2007/08.:confused1::confused1:

What if I'll do my account on August 31? is it still the same?

tax year 2007/08 (Accouting year is Aug 31)
Taxable income from Jan 01, 2008 to April 04 ,2008 (£0000 x 3/8)

tax year 2008/09 (Accouting year is Aug 31)
Taxable income from April 05,2008 to March 31,2009
Overlap profit (taxed) is from April 05,2008 to August 31,2008, am I right? Taxed twice for 5 months worth of income.

If this is the case,how can I recover this?

Thanks a Million.:thumbup:

pinoyLiz

Or August is not ideal as it's not on a 12-month profit:confused1::crying: