How far to go back

Hi everyone,

I have just taken on a new client who wants to set up a new limited company with 2 directors, herself and her husband, this is straight forward enough.
However, they both have property they rent out. The husband is not so bad as only started renting out last year so he has registered as needing to complete a tax return from 2011/2012.

The problem is his wife who has rented out her property since 2008 but never registed with HMRC. However the property has been making a huge loss up to last year 2010/2011 when it made its first profit.

My question is this. She has now contacted HMRC to register as self employed so she can complete a tax return for the profit for last years accounts but does she also need to declare the loss from previous years ie. complete a tax return for each tax year that she has been renting out the property?

I should know the answer to this but I am having a very blonde moment. lol:001_unsure:


  • peaman
    peaman Registered Posts: 123 ? ? ?
    Do you have all the details of income/expenses from 2008?

    If you have, I would have a look at the total losses for 2008/09 & 2009/10, if the losses are quite small I wouldn't bother preparing returns for these years and do not claim the losses b/f in the 2010/11 return.

    If the losses in the early years are quite large I would prepare the returns for 2008/09 & 2009/10 and claim the losses. Assuming the client still has the other information they will need to complete the returns (P60's bank interest etc.).

    If you do not prepare the returns for 2008/09 & 2009/10 you should not claim the b/f losses in 2010/11, although I tried this a few years ago and got away with it. So, it might be worth a try!

    For returns prior to 2010/11 the late filing penalties cannot exceed the tax liability. So, presumably there will be no tax liabilities for 2008/09 & 2009/10, so no penalty!
  • Laura8192
    Laura8192 Registered Posts: 95 ? ? ?
    I have a client whose property has only just started making a loss after a few years making profit (loss for Tax year ended April 2012), and I spoke to HMRC who said there is no need to submit a tax return for this year is no profit has been made. They advised that it would be beneficial for me to prepare a basic income/expense account to show how the loss is calculated and send this in to HMRC with a covering letter, then in future years we will be able to off set the loss from this year against future rental profits. So I don't think you will have to submit returns for the years in which the property was incurring a loss. I am very new to all this though so may well be wrong....
  • peaman
    peaman Registered Posts: 123 ? ? ?
    Laura8192, yes this is what I did. I put the losses on the return (with no returns prepared for previous years), HMRC then questioned the losses, so I provided them with a spreadsheet showing the losses for the earlier years. They were happy with this and there was no need to submit the earlier returns.

    I did this several years ago, I forgot how I did it until I saw your email.

    It is good to know that HMRC can still be flexible about some things!!
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