The lingering effects of the recession have drastically affected many businesses often causing total close down.
There are often tax reliefs available in these situations that may go some way to helping investors either to recoup some of their losses or possibly assist with starting a new business.
Most business people trading on a self employed basis on their own or via a partnership will be entitled to “Terminal Loss Relief” and this will in many cases generate a repayment of income tax and class 4 NIC’s. Terminal losses can be carried back up to three years so there is usually a good chance of utilising losses and obtaining a repayment from HMRC.
There is often more scope where it is a limited Company that has ceased to trade and dissolved following adverse trading.
Firstly, much like in the case of self employed individuals, the company would be entitled to claim terminal loss relief where losses have been incurred in the final year of trading. Again these losses can be carried back up to three years to obtain a repayment of corporation tax.
Secondly, and perhaps more importantly, shareholders are very likely to be in a position to make one or more loss relief claims personally. This will be the case where there has been any funds loaned to the company by them and remaining outstanding, in such instances a “Capital Loss” may be claimed which could be set against gains arising on other chargeable assets in the same or future years.
A claim which is often overlooked is the loss arising in respect of the shares in the company which will have become worthless. This would generally also be a Capital Loss but in certain circumstances relief can be claimed for these losses against income.
If you have been involved with any business that has ceased in recent times and you are unsure if you have claimed all possible tax reliefs, please contact Darrell Booth or Kirsty MacDonald who will be happy to take your details and undertake a review for you.