BIM70555 Co. Losses

[LIZZII]

www.hmrc.gov.uk/bimmanual/bim70555.htm has the full details.

I have a Company, that ran 2 trades, job recruitment & property, all under one limited Co.

Job recruitment side ceased to trade & the Company rented the freehold property out that we traded from & the house the co had purchased.

After ceasing trading on the job recruitment side, we were involved in litigation which went against us.

To pay the Company remortgaged its property & paid the Court. We are still paying this mortgage today.

The HMRC say that according to BIM70555 you cannot offset the losses from one trade against the other.

OK, however, the job recruitment side DID NOT PAY A PENNY, so that side did not suffer a loss.

********The property side paid & is still repaying the mortgage******

So my question*********

Did the loss arise from job recruitment OR did the loss arise from the property side with the litigation?

[collich]

It doesn't really matter who physically pays the expenditure. It's who incurs the expenditure and that would appear to be the recruitment trade.

Even if there were any arguement that the expenditure was that of the property business - it is unlikely it could have a tax deduction because the expenditure doesn't appear to be wholly and exclusively for the purpose of the property business.

You do know that a company can set a loss against its total profits in the same accounting period (your references relates to sole traders - but because this is a company - the rules are different (see CTM04050 et seq) It can also carry it back.

[Incredulum]

"I have a company that has two trades."

Are you sure? Did it acquire one of the trades? Did it submit corporation tax computations on the basis of two trades? A single company that does completely different things does not necessarily have more than one trade.

In any event, I do not see why the company will not generate, year-on-year, a non-trading loan relationship deficit which can be offset against total profits of the period.

[LIZZII]

thanks for both your replies.

the losses occured in 2005. HMRC has only now, pointed this issue out. Is it too late to carry back losses?

[Incredulum]

Confused re your timings, when and how loss occurred and when you book what costs.