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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4199
Experience:  FCCA FCMA CGMA ACIS
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I am a director of a company that has made substantial losses. I

Customer Question

I am a director of a company that has made substantial losses.
I am also employed and pay Tax under PAYE.
I am about to receive capital from an offshore trust, which I understand has to be declared as a distribution.
Can the loss made in the company be used to offset the other taxes?
Regards
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
I assume that this distribution from the offshore trust is in your personal capacity and not the company's. If the former is the case then no offset is available. In the latter case an offset against Corporation Tax can be utilised.
So sorry to have to rain on your parade.
Customer: replied 2 years ago.
Thank you for the reply.
The LTD co is a member of an LLP - and so am I.
So members of LLP are e ltd, individual 1, Individual 2, Individual 3, four members in all.
Does that make any difference to your reply?
Expert:  bigduckontax replied 2 years ago.
No, not at all. there is a legal difference between a company and its shareholders. I submit that my original reply stands.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Customer: replied 2 years ago.
This was my original thinking ...
If a company is loss-making it is possible to generate a corporation tax refund by offsetting those losses against profits of the previous year. If there are no profits in the previous year the company can carry forward those losses and offset them against future profits.Alternatively if the company is a member of a group there are further options available to utilise those losses because losses incurred by one company within a group can be offset against profits of another?
Expert:  bigduckontax replied 2 years ago.
Here is the Gov UK web site advice on this matter:
'Instead of carrying a loss forward, you can claim for the loss to be offset against profits for the preceding 12-month period (not accounting period). But you can only do this if your company or organisation was carrying on the same trade at some point in the accounting period or periods that fall in the preceding 12-month period.'
So what you suggest is perfectly feasible providing the proviso regarding the type of trade is met. Alternatively, if a company is a member of a company group then losses can be offset upwards, downwards and sideways within the group as convenient.