Losses Made, Tax Saved!
In the midst of this current recession, there will be an unprecedented number of businesses seeing red for the first time when they come to draw their year end accounts. For some this will be the first time that they have not made a profit, having benefited from the positive economic climate prior to the recession triggered by the credit crunch during 2008.
Small business owners are cost conscious and astute when it comes to profitability. Yet the sudden changes and the ferocity of the recession has caught out many. Javeed Baig, a leading Leicester Accountant, is reminding his clients of the tax strategies available and importantly of some new tax allowances that must be considered. Mr Baig commented; "There are many tax allowances available that simply may have never applied to successful businesses previously. Your next tax return could be the most important that you have ever submitted and, prepared carefully, it could make a huge difference to the amount that you hand over to the Government".
"Cash is King"
In times of recession cash is king and for the time being, Chancellor Alistair Darling has temporarily extended tax relief so that businesses facing a loss can claim back tax paid in earlier years. The claim for one year has now been extended to three years. This facility applies to limited companies with losses in accounting periods ending between 24th November 2008 and 23rd November 2010. For sole traders and partnerships it applies, in most cases, to periods ending between 6th April 2008 and 5th April 2010.
Naturally, there is an order of events that must be followed. The business must make the tax claim against other income in the year the losses arise. The loss can then be taken against trading profits of the preceding year and up to 50,000 of any balance remaining to the two remaining years.
This can provide a welcome relief despite the cap of 50,000. If you have losses exceeding the cap, or expect losses to exceed the cap in the next financial year, it would be wise to seek professional help as there ways to make this cap go a whole lot further. As with all successful tax planning, careful consideration is required.
When to Crystallise A Loss
The key issue facing the business owners is whether to hold the losses for future years to set off against future profits, or utilise the losses and carry them back. If indeed you expect profits in future years to take you into the higher rate tax bands, then preserving your losses will yield higher tax savings in the longer term.
This area remains complex and in many instances it is highly dependant on personal circumstances. There is no "one size fits all" solution and ultimately for many hard working small business owners cash will ultimately be king.
Accountants Leicester are a firm of Chartered Certified Accountants based close to Leicester City Centre. This article is written for information purposes only and does not constitute advice on your personal circumstances. To learn more about the author or to receive professional advice personal to your circumstances please call 01162 206019 or visit http://www.accountantsleicester.net
Small business owners are cost conscious and astute when it comes to profitability. Yet the sudden changes and the ferocity of the recession has caught out many. Javeed Baig, a leading Leicester Accountant, is reminding his clients of the tax strategies available and importantly of some new tax allowances that must be considered. Mr Baig commented; "There are many tax allowances available that simply may have never applied to successful businesses previously. Your next tax return could be the most important that you have ever submitted and, prepared carefully, it could make a huge difference to the amount that you hand over to the Government".
"Cash is King"
In times of recession cash is king and for the time being, Chancellor Alistair Darling has temporarily extended tax relief so that businesses facing a loss can claim back tax paid in earlier years. The claim for one year has now been extended to three years. This facility applies to limited companies with losses in accounting periods ending between 24th November 2008 and 23rd November 2010. For sole traders and partnerships it applies, in most cases, to periods ending between 6th April 2008 and 5th April 2010.
Naturally, there is an order of events that must be followed. The business must make the tax claim against other income in the year the losses arise. The loss can then be taken against trading profits of the preceding year and up to 50,000 of any balance remaining to the two remaining years.
This can provide a welcome relief despite the cap of 50,000. If you have losses exceeding the cap, or expect losses to exceed the cap in the next financial year, it would be wise to seek professional help as there ways to make this cap go a whole lot further. As with all successful tax planning, careful consideration is required.
When to Crystallise A Loss
The key issue facing the business owners is whether to hold the losses for future years to set off against future profits, or utilise the losses and carry them back. If indeed you expect profits in future years to take you into the higher rate tax bands, then preserving your losses will yield higher tax savings in the longer term.
This area remains complex and in many instances it is highly dependant on personal circumstances. There is no "one size fits all" solution and ultimately for many hard working small business owners cash will ultimately be king.
Accountants Leicester are a firm of Chartered Certified Accountants based close to Leicester City Centre. This article is written for information purposes only and does not constitute advice on your personal circumstances. To learn more about the author or to receive professional advice personal to your circumstances please call 01162 206019 or visit http://www.accountantsleicester.net
Source...