Sole Trader with no turnover

JodieR

My client started a small business in 2008/09 while he was in full time employment and made a small profit in the first year. In 09/10 he was still in full time employment and while he was still incurring costs for his business he didn't actually sell anything. In April 2010 he was made redundant and set up a Ltd Company doing the same thing as the sole trader business was doing and is now making money from it. I'm inclined to treat the costs incurred in 2009/10 as pre-trading expenditure for the Ltd company, but do you think it's ok then to complete the self employment pages on his 2009/10 tax return with zeros and just include a explanatory note in the white box? Has anyone come accross this before?
Jodie

deanshepherd

He was either trading or he wasn't. I'd be inclined to set the loss against other income. You also have the option of setting those losses against future income from the company if you prefer.

Monsoon

My gut feel is it's one trade, and that trade incorporated in April 2010.

As Dean says, if he made a loss in 0910, it might well be beneficial to offset that loss against other income. Being pernickety, that may save tax at 20% (if basic rate taxpayer) and CT is taxed at 21%, but a refund now is probably preferable to a reduced CT bill in 21 months time.

bumblebee

Loss in first four years of trade

I agree with Monsoon and Dean, Although depending on the amount of loss for 09/10, loss can be carried back for up to four years in the first four year of trade if i am correct, However they may loose personal allowances. In my opinion and considering the current climate; loss relief would probably be the right option.

JodieR

thanks guys - he was a higher rate tax payer in 2009/10 from his employment income so it would definately be advantageous to set the loss against this rather than against future corporation tax bills, I just wasn't sure if it was ok to complete the self employment pages with no turnover.