Losses

Dottie

Have just submitted a Tax Return for a client who commenced self-employment during the year, made a loss and I offset this against other income in the year.

I now think I should have carried it back because he was a higher rate tax payer last year and therefore would receive a higher tax rebate. Is this correct and can I file an amended return or do I have to write to HMRC?

Fingersan

Hi Dottie... I believe your treatment was correct. From what I can remember of trading losses, they first must be offset against other income in the year and then any available losses can then be carried back / forward.

If I am wrong, please let me know

Monsoon

Have a look here to see if you can do it by phone or you have to write

http://www.hmrc.gov.uk/agents/contacting-hmrc.pdf

This is a brilliant link, I wish I'd known about it years ago!

From what you've said, it sounds like a carry back would be better if possible. When I say if possible, it's because I know they changed the carry back rules for a bit to make it more favourable - I can't remember off the top of my head so do check. I also I think you have a free choice in the first year and don't have to offset against current year first, but I can't remember offhand.

I always have to look up losses, they won't stick in my head, but my gut feel is you can carry it back. It's worth reading up to check.

See if you can amend it over the phone (or indeed submit an amended return online if you have 3rd party software).

deanshepherd

You can always choose to either set off against other income or carry back to previous year. No need to do one before the other.

If that is sufficient to get higher rate relief then go ahead and submit an amended return.

If you want to carry back further than the previous year then you can either use opening year rules or the temporary favourable rules suggested above.

I am assuming you are within the time limit for amending the return.

Dottie

Yes, I am within time and have submitted amended return. When I checked online the original refund amount was "pending". I assume the amount of refund due for the 2010 Tax Return will be reduced and then the refund for the amount carried back will be issued at a later date. Client is very happy!

Rachel

Just be aware if you amend a self assessment online, there is a fault at HMRC and you will not be able to view it again once resubmitted. They are trying to fix it by mid December . . .

JodieR

Have a look at my post from a few weeks back regarding losses carried back - as you've done it on an amended return you could be waiting AGES for the refund.