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Early Years Loss Relief

With an ever growing trend to self-employment, there should be plenty use of the capacity to carry back for three years losses incurred in the first four years of business.

This is an often overlooked relief which has a significant chance of becoming relevant when many businesses struggle to make profit in their early years.  This is particularly true when you consider that the generous capital allowances currently available can turn a financial profit into a tax loss.

It is often overlooked when considering whether to trade as a sole trader or partnership, or to trade through a limited company.  If you choose the corporate route, you cannot take advantage of this relief.

Another facet to this that is often overlooked is that HMRC will often allow a new business to exist when you might think you are running the same one.  They give the example of a publican who buys a new pub.  The publican might think it’s the same trade.  HMRC will allow it to be a new one for the purposes of early years loss relief.

Definitely one to have not too far up your sleeve, this one.

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