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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I was registered self employed in 2006/2007. I was also registered

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I was registered self employed in 2006/2007.
I was also registered for vat as a sole proprietor.
I worked as a commission only sales agent trading as a business inside n out in my name a little like a franchise.
The business went into administration as the main supplier and payer of the commission went into liquidation.
The administrator sent me notice that my losses were in excess of £250,000 so I entered these on my self cert in 2006/2007 and 2007/2008 at which point the hmrc told me not to fill in any more self certs as I had made such large losses.
my question now is the HMRC have done a local compliance on me and say that the losses were not relating to me as an individual and so are not allowed to claim.
Is this correct.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you tell me what you mean by "self certs" please. Do you mean self-assessment tax returns? Could you explain a little about how the business as a commission agent worked please. Did you actually incur personal trading losses of £250,000?
Customer: replied 3 years ago.

Yes self assessment tax returns.


Main company supplied products and services and charged my operation then I organised staff and myself to sell products for commission.


Losses were invoices outstanding due to main supplier £274,946.43


my commission due on sales £125,956.79 which was not paid and this equated to an amount owing to main company of £148,439.64.


as the company used my commission to reduce the total amount owed to them.


however my total losses were the full amount as I was not paid and the full losses were £274,396.64.


my sales for this had been in excess of £500,000.


 


 

Expert:  TonyTax replied 3 years ago.
Thanks.

I'd like to clarify several points. Did you operate this business as a sole trader or through a limited company with you as the director/shareholder? Was it your limited company that went into administration with debts because the main supplier also went bust?

Did you owe the main company £274,946.43 for products and services which was reduced to £148,439.64 by sales commission owed to you by the main company of £125,956.79? Did you pay the £148,439.64 to the main company or the liquidator?
Customer: replied 3 years ago.

Operated the business as a sole trader and was registered as sole proprietor in my name for VAT.


yes the details about owing main supplier £274,946.43, reduced by my non payment of commission of £125,956.79 to £148,439.64 are correct.


No just the main supplier went into liquidation not me and the liquidator sent me a notice asking me to forward a cheque to them for this amount. When I called to say I had no means to pay they didn`t take it any further £148,439.64.

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 3 years ago.

Hi again.

The administrator of the company which supplied your products would have no idea about what you needed to disclose in your tax return so the figure of £250,000 is wrong as far as your tax return is concerned. When you are self-employed, you should prepare a set of accounts, the figures from which are transferred to your personal tax return here.

Your income or turnover would be the sum of the combined value of the net of VAT invoice values. So, if you issued an invoice for £100 and added £20 VAT, in your tax return you would disclose £100 of income. You would have reclaimed the VAT via your VAT returns assuming you were not in the flat rate VAT scheme for which your turnover would have been too high in any event. You would also disclose your expenses including the cost of sales (the products you purchased), wages, commission paid to employees/sub-agents and all the other expenses a business usually incurs such as those outlined here. This list is not exhaustive. That would show your trading profit or loss. You could claim bad debt relief for any commission not paid to you but that is balanced by the fact that you didn't pay all your invoices for products and owed the company £148,000 or so when it failed.

If you want to argue with the tax office, then I would recommend that you give all your records to an accountant or tax adviser to review and to possibly produce an accurate set of accounts or sets of accounts depending on how long the business lasted as what you appear to have claimed as your loss is not the real picture.

 

Ultimately, it may all be academic if you had no income against which to set the trading losses and when the business ended, your ability to use the losses in the future ended too. If HMRC are trying to say you made a profit, then you should certainly seek out some advice as I suggested in the previous paragraph.


I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15884
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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