Tax self assessment - new business as well as old business
Discussion
I've been self employed for 5 or 6 years now I think doing the tax returns myself each year with no really concerns. Nice and simple just me working as a sole trader.
This year (tax year 2017/18) I have started a new venture with a partner (simple sole trader style partnership) that is definitely going to make a loss overall.
Will my losses from business 2 mean that I pay less tax overall as as a person I have made less profit, or do they count for the business only, so £0 tax for business 2, but normal for business 1?
The businesses are of a very similar nature (#1 personal training, #2 gym) could I just absorb my half of business two, into business 1 and for the sake of self assessment include it as the same thing? Or does the fact I have a partner mean that won't be possible?
Should I just get an accountant to do this for me?
This year (tax year 2017/18) I have started a new venture with a partner (simple sole trader style partnership) that is definitely going to make a loss overall.
Will my losses from business 2 mean that I pay less tax overall as as a person I have made less profit, or do they count for the business only, so £0 tax for business 2, but normal for business 1?
The businesses are of a very similar nature (#1 personal training, #2 gym) could I just absorb my half of business two, into business 1 and for the sake of self assessment include it as the same thing? Or does the fact I have a partner mean that won't be possible?
Should I just get an accountant to do this for me?
A trading partnership needs to register with HMRC as a "Partnership" and once that is done, it will get its own SA number. If you have not done this yet, you should get it sorted very quickly.
The partnership has to submit its own SA tax return to HMRC. On that return will be shown the partnership profits or loss for the year and how that profit or loss is being split between the respective partners in that tax year
The individual partners submit their own personal self assessment tax returns on which they show income from all sources, including their income from self employed trading activities and their share of the partnership profit or loss.
HMRC allows a trading loss to be offset against other income in the same tax year. If you are declaring a share of trading loss from the partnership on the tax return, you can elect to have the loss offset against your other income in the tax year.
It's so simple isn't it
The partnership has to submit its own SA tax return to HMRC. On that return will be shown the partnership profits or loss for the year and how that profit or loss is being split between the respective partners in that tax year
The individual partners submit their own personal self assessment tax returns on which they show income from all sources, including their income from self employed trading activities and their share of the partnership profit or loss.
HMRC allows a trading loss to be offset against other income in the same tax year. If you are declaring a share of trading loss from the partnership on the tax return, you can elect to have the loss offset against your other income in the tax year.
It's so simple isn't it
Got it. Thanks. Pita bit I think I can handle doing it myself.
We've been established a few months now - can you remind me what the time frame is for declaring yourself for self assessment from commencing business? Pretty sure it needs sorting asap bit I've had other stuff on my mind, like getting business in the door! Haha.
We've been established a few months now - can you remind me what the time frame is for declaring yourself for self assessment from commencing business? Pretty sure it needs sorting asap bit I've had other stuff on my mind, like getting business in the door! Haha.
TheBALDpuma said:
Definitely more than a couple of days ago, but comfortably within this tax year. I'll get on it!
Why can't people answer the actual question that was asked?On what date was the partnership commenced?
If it is "comfortably within this tax year" I presume it must have been sometime after 5 April 2017.
If that is indeed the case, then the first tax year for which a partnership tax return needs to be completed and submitted is for tax year 2017/18. The 2017/18 tax return filing deadline is 31 January 2019 - so there is no immediate panic regarding completing and submitting this return. However, you still need to notify HMRC sooner rather than later and obtain a proper Self Assessment tax reference for the partnership.
This also means that the first tax year in which any losses generated by the partnership can be offset against "other income" of the partners is tax year 2017/18, so the claim for loss relief would be included on your personal self assessment tax returns for 2017/18.
The other point I would raise is, how do you know the partnership business really has generated an actual loss?
Are you basing this on accounts that have been prepared using normal accounting conventions etc and is the partnership claiming Capital Allowances correctly on any assets it may have purchased?
I just didn't want to incriminate myself! :Hehe:
Yep I'm aware nothing needs to be done until Jan 2019 with regards to submitting a return.
How do I know we'll make a loss... Initial outgoings will be in the £10k multiples, where as incomings in the £1ks if we're lucky. Rent/equipment/refurbishment etc.
Yep I'm aware nothing needs to be done until Jan 2019 with regards to submitting a return.
How do I know we'll make a loss... Initial outgoings will be in the £10k multiples, where as incomings in the £1ks if we're lucky. Rent/equipment/refurbishment etc.
TheBALDpuma said:
I just didn't want to incriminate myself! :Hehe:
Yep I'm aware nothing needs to be done until Jan 2019 with regards to submitting a return.
How do I know we'll make a loss... Initial outgoings will be in the £10k multiples, where as incomings in the £1ks if we're lucky. Rent/equipment/refurbishment etc.
Purchasing equipment is not a revenue cost that can be offset against the profits of the business. I hope that's not how you are accounting for the acquisition of your fixed assets.Yep I'm aware nothing needs to be done until Jan 2019 with regards to submitting a return.
How do I know we'll make a loss... Initial outgoings will be in the £10k multiples, where as incomings in the £1ks if we're lucky. Rent/equipment/refurbishment etc.
You can, of course, claim tax relief through Capital Allowances on such equipment but that is claimed outside of the accounts and through the tax computations.
If you have acquired equipment under any sort of lease or hire arrangement, the tax and accounting rules are different.
If you are buying stock, you cannot offset the purchase cost of the stock against your current year profits unless that stock was used to generate sales in the year. If it remains unsold at the year end, it is carried forward to next year's accounts for offset against next year's sales.
As I said, to calculate your ACTUAL tax relievable losses, you need to apply the correct accounting and tax rules when arriving at the loss figure.
TheBALDpuma said:
Got it. Thanks. The largest cost by far is renting the building! Damp cold warehouses aren't that cheap haha.
Any upfront deposits or rents paid in advance included in your loss calculation?If so, they should have been posted to the business balance sheet as a refundable deposit or as deferred rental costs applicable to later accounting periods?
TheBALDpuma said:
I haven't actually worked out losses yet... Got a list of ins and outs bit haven't sat down and worked anything out, will do the when doing my return. Yeah I get the you can't use a deposit that you'll get back as money spent.
And money expended as part of a future period. Rents are often paid at least one month in advance - so you might need to defer some of that to a future period too.There might also be issues surrounding the capital accounts of the individual partners and legal matters surrounding the nature of the partnership agreement.
You asked earlier if you needed an accountant. I would suggest you do - especially when you are dealing with a partnership and not a sole tradership
Eric Mc said:
And money expended as part of a future period. Rents are often paid at least one month in advance - so you might need to defer some of that to a future period too.
There might also be issues surrounding the capital accounts of the individual partners and legal matters surrounding the nature of the partnership agreement.
You asked earlier if you needed an accountant. I would suggest you do - especially when you are dealing with a partnership and not a sole tradership
You're probably right. I've been doing my accounts for 6 or 7 years now, but I don't know whether I'm doing it all 100% correctly - I just use the online help stuff if I'm unsure but may have done things wrong or badly in the past.There might also be issues surrounding the capital accounts of the individual partners and legal matters surrounding the nature of the partnership agreement.
You asked earlier if you needed an accountant. I would suggest you do - especially when you are dealing with a partnership and not a sole tradership
Would take the stress out of it having someone else do it anyway!
Many people are in the same boat. HMRC knows that a huge number of submissions (millions) made under Self Assessment have been quite wrong - mainly through the ignorance of the submitters.
However, HMRC has never been given the correct resources to be able to monitor Self Assessment returns correctly. That is the main reason why they want to abolish Self Assessment - it's effectively a s
t system.
However, HMRC has never been given the correct resources to be able to monitor Self Assessment returns correctly. That is the main reason why they want to abolish Self Assessment - it's effectively a s
t system.Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff