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Where Taxpayers and Advisers Meet

Would HMRC argue this is 2 separate trades?

Hels
Posts:2
Joined:Mon Feb 01, 2016 1:02 pm
Would HMRC argue this is 2 separate trades?

Postby Hels » Wed Aug 02, 2017 1:12 pm

I have a new client that supplies and maintains fire equipment as well as providing health & safety online support. This has always been treated as one trade for CT.

The company has previously made losses that are being carried forward and set against future profits.

For commercial reasons they want to transfer the supply and maintenance business to a subsidiary. They have looked at the split of the profits and losses and have calculated that the maintenance side makes a loss and the online support makes a profit.

So I believe that when the trade is split the loss of say £100k (for both accounts and tax purposes) will follow the maintenance business and the online support business will start at no profit no loss.

My concern is will HMRC try and argue, on the basis of the above, that this is 2 trades and should have been shown as such for CT purposes which may mean tax is due for earlier years. In addition if that is the case will they argue that this was careless and look to go back 6 years?

Having looked at BIM80530 my feeling is that they wont as the 2 divisions aren't that fundamentally different that they cant constitute one trade and up until now financially they have been interdependent.

I would appreciate readers views.

Thanks

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