carrying forward trading losses

[topcom]

We have a company (property development) with substantial trading losses. Due to heavy debts the bank called in their loans and put in a Land & Property Receiver over properties specifically charged to them. The company has a history of joint ventures with other parties some connected with family members and is receiving profits to pay off substantial debts and directors' family loans. The Inspector is seeking to disallow the losses forward and this may go to appeal.
Any comments would be appreciated as this seems very harsh in view of the known problems with the property crash and losses as a result and high interest charges that have been met by the directors from their own resources.
Charterhouse Cons

[Nigel Lord]

Chartertax

There is insufficient information contained within the body of your question to provide a detailed response. The following points may explain the Revenue's resistence to loss relief:

1. Trading losses carried forward are not allowable against a trade of a different nature. (Is there any question of the losses pertaining to property dealing or (Schedule A) investment properties and the new profits relating to development?

2. Where there is a change in the ownership, and a major change in the nature of conduct of the trade within three years, losses may be disallowed. Has the appointment of a Receiver resulted in a change of ownership?

3. Where the scale of a company's activities have become negligible, and there is a change in ownership before any considereable revival, losse may be disallowed.

4. If a trade has ceased and a similar trade commences at some later date, it is sometimes the Revenue's practise to treat this as a separate trade and disallow losses.

5. Is the nature of the joint ventures sufficiently different to the previous activities to constitute a new trade. How are the joint venture reflected in the company's accounts?

If you would like specific advice we would be pleased to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
102 Smarts Lane
Loughton
Essex, IG10 4BS
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com