Corp Tax Question

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
I'm trying to complete the CT600 for a client who's previous years accounts were as follows:

2004 - Net Loss £13K due to directors loan

2005 - Dormant

2006 - Profit £21K

As the loss has been carried forward can it be offset against this years profit reducing the tax liability. The loss from 2004 arose as the director lent the company the £13k to get the business started but there had not been any trading up until 2005/06.

Sorry to sound thick but having a really bad blonde day, so any advice greatly appreciated.

Michelle

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    I'm unsure as to your comments "the loss arose as a result of the directors loan". If the director made a loan to the company this would be credited to his / her loan account. I can't see how the introduction or withdrawal of a loan could create a loss??? If the £13k loss was as a direct result of Trading Losses then this is eligible to be offset against the profits under the carry forward legislation.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Exactly - I can't see how either but I do have a loss of £13K and according to the notes from the previous accountant it was because of the directors loan.
    I assume the director paid for all items to get the business started with a view to being repaid once trade began - there was no income in the year according to the director.
    I can't tell as I don't have a P & L account from the previous accountant.
    The only items that had been passed on were the abbreviated accounts and the notes.

    I can't go back to the previous accountant as he is 6ft under and his staff have looked and everything they have has been passed on.

    Michelle


  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    I would go back to your client and confirm how the £13k loss arose. I can only assume that it was as a result of expenses paid on behalf of the company by the director which would give rise to the £13k loss, in which case there should be a credit balance on the directors loan account in the loss-making year representing funds introduced by the director. If that is the case, then you could assume the £13k is a trading loss and use the carry forward relief - but obtain confirmation from your client as well.

    Do the staff who still work at the accountants not have access to ANY working papers. They are required to be kept for a minimum period of time. They must have something to go off.

    Kind regards
    Steve



  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Thanks Steve
    I will check as the difference is a tax liability of £2841 or nil.

    I have asked several times over the past week for the working papers but they insist everthing has been passed on. According to my client the staff that were left were having a clear out as the office is to close. I can only assume someone has thrown them out by mistake.

    Regards
    Michelle
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    You say the previous accountants have "passed on" the file. Passed on to whom? I can't see them passing a file of working papers back to the client - I can only assume that the practice has been sold and they have passed it on to the buyers, in which case you could contact them to see if that is the case.

    The chances are that the staff can't be bothered looking for it!!

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    HMRC will have a copy of the full accounts, CT600 and tax calculation on their files.

    Might be an idea to get them to hoike it out their archives and send you a copy.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    The practice insist the files were passed to the client but all I have is the draft accounts for 2006 and the abbreviated accounts for 2004 and 2005, copies of the tax returns and copies of the annual returns for companies house.

    The practice isn't being sold it has closed, according to my client, all the clients were advised to get new accountants and a letter was sent to my client from the practice giving clearence to whom ever they wished to appoint.

    I think you are right the staff can't be bothered - lets face it they are effectively out of work.

    Regards
    Michelle

    However I have spoken to my client, he said all the costs relate to setting up the business - buying the computers and office furniture, setting up a website, travel costs incurred whilst trying to source contracts
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Thanks Dean,

    Hadn't thought of that.

    Regards
    Michelle
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Hi Michelle,

    You could try HMRC but don't hold your breath. I've been waiting nearly 6 months for them to send me a copy of a clients 1996/97 SA return to get the overlap details (we took over due to deceased agent). They've said they are having trouble as if their offices have been reorganised it is more difficult to locate files. Strange in today's modern technology environment.

    Good luck
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Hiya Peugeot

    As an HMRC employee thought I might be able to shed a little light.

    We can access tax returns from 98/99 onwards from the computer system so sending copies of SA returns to agents is not a problem. Anything older than that has disappeared into the ether! We work on a "paperless" system. Unless there was an enquiry into the 96/97 return I doubt very much there would be any paperwork kept for the client.

    Some files do get sent to the repositories if they contain significant information and they are a nightmare and expensive to retrieve. Has HMRC given you any reason for the delay?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Steve you have confirmed my worst fears regarding HMRC.
    I rang the office which the accounts are normally sent to, I was then told to ring another office as the clients details were held there due to reorganisation. Only to be told I had to go back to who I spoke in the first place!!

    I really can't wait for HMRC to pull their finger out, this return and the accounts are almost 3 months overdue - not my fault I was only appointed on Friday.
    I spoke to my client and he is happy to suffer the tax liability if it means getting the accounts submitted - with no proof I don't see any other option, unless anyone has any other ideas??

    Regards
    Michelle


  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Hi Carlykittens,

    The return I asked for was the first one prepared for my client under the new self-assessment system for details of overlap profits. It seems to be untraceable but it must be somewhere and I won't give up until it is found.

    I have managed to find someone who is prepared to do a bit of digging for me, so hopefully it will be found.

    Krispi,

    Sometimes you do manage to find an employee at HMRC who is prepared to help you rather than just transfer you from one department to another. In the past some employees (as is the case with Carlykittens above) have proven to be extremely helpful and will go that little further to help with problems - the problem is getting them on the other end of the phone! In your accounts case, failing to get anywhere with HMRC, I would do what you say. Once the tax returns etc. turn up and they are legitimate losses, you could put an error and mistake claim in to HMRC to claw back the tax suffered.
    Speak to your client about this and put it in writing what you have done.

    Regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Krispi, the information you are asking for is only a couple of years old and very different to requesting information from 96/97.

    Whether you claim the losses brought forward on the tax return or not will not affect the accounts. Get the accounts done and off to Companies House, persist with requesting the info from HMRC by phone and perhaps also write a letter to confirm that you are awaiting the information to complete the current CT600.

    If you wish to file everything now then I would suggest claiming the losses and paying no tax and then if it becomes necessary, submit an amended return later.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Corp Tax Question

    Finally all sorted.

    The loss can be claimed and I now have all the invoices relating to the year in question. So all happy - accounts done and sent and CT600 done and sent.

    Thanks everyone for all your help and advice
    Michelle

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