Tax credits claim with 2 businesses with a profit & a loss

GinnyBee Registered, Tutor Posts: 131 ? ? ?
Can someone confirm what is the case in this situation for me please :001_smile:

The client (married couple) I am dealing with has two businesses, both of which started in the 2011-2012 tax year, one LTD and one LLP. One is in profit the other is a loss (diff industries)

Can they include the loss in one of the new businesses with the profit on the other in the first year of claiming?

They have previously claimed based on being employed and a sole trader. The sole trader continued for part of the tax year and has some profits which will need to be included in the total income.

It is the number of new businesses that has got me wondering. Do I simply find the global income (salary+ divideds +sole trader -losses) fro all the businesses or do I exclude some? The more I think about this the more my brain is going round in circles!! I know what i think is right, I'd just like some confimration form someone in the know!

Thank you :001_smile:


  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    I dealt with something similar last year. For tax credits the income figure provided for self-employment, regardless of how many self-employments there are, is the total of all of them, so if one is an income and the other a loss, simply deduct the loss from the income and use that figure. If there is a negative figure produced, then for tax credits this is simply nil. Hope that helps.
  • groundy
    groundy Registered Posts: 495
    TC you are right if partnership or sole trader but if one is a company then you have to declare dividend (other income) and employment seperate to any losses in self employment. The self employment box would be nil on tax credits if a loss.

    On a seperate note is there justification for a management charge from the loss making business to the profit making business to utilise losses?
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    If the Ltd is in a loss, tough luck.

    If the LLP is a loss, then it counts as self employment and the loss can be deducted from other income.

    If the Ltd is a loss then if you can justify a management charge across the two companies to even it out, go for it, but only if you have reasonably good grounds for doing so.
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