Business Tax Details
Losses
Businesses that make trading losses can generally carry back the loss to set against profits made in the previous accounting period. This one-year carry back facility was extended to three years last November, but only for sole-trader or partnership accounting periods ending in the year to 5 April 2009 (2008/09), or for company periods ending in the year to 23 November 2009. As the recession is now expected to last longer than first thought, this loss relief extension will now apply to the following accounting periods:
- For unincorporated businesses: the periods ending in the tax years 2008/09 and 2009/10.
- For companies: the periods ending in the two years to 23 November 2010.
For each loss making period an unlimited amount of loss can be carried back one year, but a maximum of £50,000 can be carried back to the previous two years. The losses must be used against the profits of the later period first.
If you are having difficulties paying the tax due on the profits made in the earlier accounting period, which will be partly or wholly cancelled out by losses made in the current year, you can ask HMRC for time to pay the tax due. The HMRC officers should now take into account the expected loss that will be carried back, but they may want to talk to us as your accountant to verify the scale of the loss.
Capital Allowances
All businesses can now claim 100% capital allowances for plant and machinery purchased each year under the Annual Investment Allowance (AIA). The AIA is generally capped at £50,000 per year for each business or group of companies. Any expenditure in excess of the AIA cap goes into the relevant capital allowance pool and receives tax relief at either 10% or 20% per year.
Now for one year only the excess expenditure, which is not covered by the £50,000 AIA limit, can qualify for a 40% first year allowance. This 40% allowance will cover plant and machinery purchased in the year ending on 31 March 2010 by companies, or to 5 April 2010 by unincorporated businesses, but not cars, integral features, long life assets or leased equipment.