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Sole traders and partnerships
In this market there can’t be many of you who are flush with cash. Last year was a good year for many so a lot of you must have paid a large amount of tax. This year you may have made a trading loss or broken even. Many of you may have been struggling to pay the tax that you had to pay on 31 January 2009.
There are things you can do
For a start you may have been able to reduce your payments on account that fell due in January.
If this still leaves you with too large a bill, consider requesting “time to pay”. The Chancellor has directed HMRC to provide instalment options for those adversely affected by the current climate. We have negotiated for a number of our clients’ liabilities to be paid over 12 monthly instalments.
You can also look at extending your accounting year end. By bringing your losses into the same tax year as your profits, you can reduce the final taxable figure which, in turn, may lead to a reduced tax bill.
You can also carry back losses against prior period profits. This could lead to a tax repayment. The Pre Budget Report has extended the period over which you can carry back up to £50,000 of losses from 1 to 3 years.
Companies
If you are trading using a company, you can also carry back losses and get tax back from prior periods. As with sole traders and partnerships, this has been made easier by the Pre Budget Report.
We can look at extending your accounting period. Again, by bringing losses into the same period, significant tax savings can be made. An extension to the year end can only be made, however, if you have not already filed your accounts, or passed the 9 month filing deadline.
The Pre Budget Report also announced some relief in that the planned 1% increase in the small companies’ rate of corporation tax to 22% from 1 April 2009 has been postponed until 1 April 2010.
Temporary extension of trading loss carry back
As has already been mentioned above, companies and unincorporated businesses will be able to carry back current year trading losses against profits of the previous three years, as opposed to the current one year carry back entitlement.
The measure will have effect for company accounting periods ending between 24 November 2008 and 23 November 2009.
The amount of losses that can be carried back to the immediately preceding year will continue to be unlimited, however, any carry back to the preceding two years will be limited to a maximum of £50,000.
As they say “every little helps”!
This is an area where our tax planning skills really can help you and your business.
Spreading your tax payments
The time to pay initiative as detailed above can also be used to spread the payment of PAYE, VAT and corporation tax. This is by negotiation with HMRC and may require you to provide cash flow information to justify any spreading of payments.
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