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Where Taxpayers and Advisers Meet

offsetting future profits against company losses

graybudge232
Posts: 1
Joined: Tue Sep 01, 2009 12:17 pm

offsetting future profits against company losses

Postby graybudge232 » Tue Sep 01, 2009 12:45 pm

Hi all,

My question put simply is this: 'Can a dormant company ratain its losses so that, if in the future it begins trading again as the same type of business, any profits can be offset against these earlier losses?'

Our company owns two beauty salons which, in the first 18 months of trading, have made a £30K loss (great timing to buy your first two businesses!). For various reasons we are considering taking the salons out of the company and operating them as separate soul traders. We wondered though whether it would be worth keeping the company as dormant so that, if and when either salon begins to make a profit they can be put back into the company, re-start company trading and offset the profits against the losses accrued previously.

I have had conflicting answers to this question and would very much appreciate any advice that may help me to decide on the best way of moving forward.

Many thanks.

pawncob
Posts: 4295
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: offsetting future profits against company losses

Postby pawncob » Tue Sep 01, 2009 9:44 pm

Losses can be carried forward indefinitely.
With a pinch of salt take what I say, but don't exceed your RDA

Jantra
Posts: 72
Joined: Tue Aug 11, 2009 8:35 pm

Re: offsetting future profits against company losses

Postby Jantra » Wed Sep 02, 2009 11:09 am

Losses can be carried forward indefinitely.
is that correct? I thought they were barred after seven years?

pawncob
Posts: 4295
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: offsetting future profits against company losses

Postby pawncob » Wed Sep 02, 2009 12:46 pm

With a pinch of salt take what I say, but don't exceed your RDA

thegablecottage
Posts: 5
Joined: Sun Aug 30, 2009 3:21 pm

Re: offsetting future profits against company losses

Postby thegablecottage » Fri Sep 04, 2009 10:43 am

I thought losses followed the trade ie if the trade is removed from the Company then the losses are lost, the "use them or lose them" rule. Please correct me if I am wrong ?

pawncob
Posts: 4295
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: offsetting future profits against company losses

Postby pawncob » Fri Sep 04, 2009 11:44 am

You don't lose them just because the company is dormant, and it's the same trade when the company is reactivated.
With a pinch of salt take what I say, but don't exceed your RDA

thegablecottage
Posts: 5
Joined: Sun Aug 30, 2009 3:21 pm

Re: offsetting future profits against company losses

Postby thegablecottage » Fri Sep 04, 2009 2:22 pm

A long while back we took the trade out of a number of small companies and hived up to another company leaving the original companies dormant. The smaller companies had trading losses but we were told by our tax inspector that because the trade was leaving the companies and being placed into a differnt "shell" where the trade was ongoing, that the losses were all lost. Is it a different scenario then if the trade is taken out of a company and moved to an unincorporated business ?

pawncob
Posts: 4295
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: offsetting future profits against company losses

Postby pawncob » Fri Sep 04, 2009 4:21 pm

gable cottage:
You can't move the losses to a different company, which is what you attempted to do.
With a pinch of salt take what I say, but don't exceed your RDA

cooler king
Posts: 2
Joined: Mon May 14, 2012 10:53 pm

Re: offsetting future profits against company losses

Postby cooler king » Mon May 14, 2012 11:04 pm

hi, some confirmation required please;

i have been carrying a trading loss forward as a dormant company

this was essentially a directors loan

i was planning to run some alternative activity through the business at a later date, hence the attraction of carrying it forward

i have been advised that i can only offset the trading loss v future profits provided the activities are of same type

this is of course a setback.

is there anything i can do as it seems a waste of time keeping the company now

is there any flexiblity with regards to the nature of the business activity?

Regards

CK

Lambs
Posts: 1418
Joined: Wed Aug 06, 2008 3:15 pm

Re: offsetting future profits against company losses

Postby Lambs » Tue May 15, 2012 6:26 am

Losses must be set against profits arising from the same trading activity.

Whilst it is true that a period of relative inactivity does not necessarily mean the trade has ceased, care is needed. HM Inspector will / may ask for evidence of some trading activity, and may try to distinguish between pre- and post- quiescence.

P, don't forget s343 reconstruction where beneficial ownership remains at 75%. Can't remember the new reference; somewhere in the 9s, I think.

Regards all,

Lambs


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