If I change my business activity what happens to my tax losses? Reply

business man in a crisis

Let’s say your current business has been having a tough time and you want to change it to something new, can you carry forward the trading losses.

Probably not look at this example from BIM85050

For example, a publican who had owned a pub in Leeds for many years sold it and bought another in York. Although in the everyday sense the trader remains a publican throughout, the York pub is not the same trade as the Leeds pub.

Tax law requires any losses (including Corporation Tax Losses) carried forward to be offset against future trading profits from the same trade.

One solution to this may be Group Relief, companies which are part of the same Group can surrender losses within the Group.

The rules about which trading losses and other amounts may be surrendered are described at CTM80110. The company that transfers the losses, etc, is called the ‘surrendering company’. The company that claims the losses, etc, is called the ‘claimant company’.

Trading losses, excess capital allowances and non-trading deficits on loan relationships may be surrendered in full. This is irrespective of whether the surrendering company has other profits against which the loss etc might have been, but has not been, set off.

Alternatively it may be possible for the loss making business to sell services to the new business and in doing so reduce its loss.

steve@bicknells.net

How to carry forward unused pension allowances 5

Taking money

If your total pension savings for the tax year are more than the annual allowance you can carry forward any unused allowance from the previous three years to the current tax year. You only have to pay tax on any amount of pension savings in excess of the total of:

  • the annual allowance for the tax year
  • any unused annual allowance you carry forward from the previous three years 

You can only carry forward unused annual allowance if during the tax year you were in either:

  • a registered pension scheme
  • an overseas pension scheme and either you or your employer qualified for UK tax relief on pension savings in that scheme

There’s a strict order in which you use up your annual allowance. First you use the annual allowance from the current tax year followed by any unused annual allowance from the previous three tax years, using the earliest tax year first.

There are special rules when carrying forward annual allowance for tax years 2008-09 to 2010-11. You should calculate the amount of available annual allowance using an annual allowance rate of £50,000 and using the current method of valuing your pension savings amount- more in the link below.

Example

Sam made total pension savings of £80,000 in 2012-13. Sam has been a member of a pension scheme since June 2010. His pension savings for the previous three years are as follows:

2009-10: £0 – he wasn’t a member of a pension scheme

2010-11: £30,000

2011-12: £0 – although he was a member of a pension scheme

Sam can carry forward £70,000 unused annual allowance to 2012-13 calculated as:

2009-10: £0 – because he wasn’t a member of a pension scheme

2010-11: £20,000

2011-12: £50,000

Even though Sam didn’t make any pension savings in 2011-12 he did belong to a pension scheme so he can carry forward all of his unused annual allowance.

The annual allowance for 2012-13 (£50,000) plus the carried forward annual allowance (£70,000) is £120,000.

Sam doesn’t have any tax to pay on his pension savings of £80,000 for 2012-13 as it’s less than the total annual allowance available of £120,000. He also has £40,000 unused annual allowance (from 2011-12) to carry forward to 2013-14.

Tax Year

Annual Allowance

2006/07

£215,000

2007/08

£225,000

2008/09

£235,000

2009/10

£245,000

2010/11

£255,000

2011/12

£50,000

2012/13

£50,000

2013/14

£50,000

2014/15

£40,000

 steve@bicknells.net