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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13870
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I have a new business which will have a lot of losses as it

Resolved Question:

I have a new business which will have a lot of losses as it is in the first year and we have been building the business. If someone else is a high earner and they invest or become partners in my business, can they off set their tax
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Hi

Thanks for your question - I aam Sam and I am one of the UK tax experts here on Just Answer.

I am aafraid not, as they are only going to be treated as a partner from the date this becomes fact, so can only have access to future profits or losses that arise, not what has taken place before.

Thanks

Sam

Customer: replied 2 years ago.

Hi Sam

Thank you for your answer. I thought if you had beg profits you could but a companies debts ?

Is that not correct ?

Dave

Expert:  Sam replied 2 years ago.

HI Dave

Thanks for your response

This is not a company - you advise this is a partnership. is this not the case?

And what are beg profits please ?

Even with profits in a partnership - the partner is only considered for part of those profits from the date they joined as a partner (so not for the whole accounting year)

If you become a limited company - the losses are lost as you change tax regimes

Thanks

Sam

Customer: replied 2 years ago.

Hi Sam

Currently we have the main company that is basically just a limited company which is the name of the business but currently doesn't trade. Currently there are 3 other companies that are limited companies trading as the main name. "X" limited, trading as "Y". The idea is that new branches open and trading as Y. I am a director of "Y" and a director of 2 of the X trading as companies. Both of the X companies have incurred losses as we shape the new company and form policies and procedures. I am looking for lenders or partners to help with the losses and hoped they could get tax relief for their investment

Expert:  Sam replied 2 years ago.

Hi Dave

Then the losses are offset against the company profits NOT the directors - and any investments individuals make (where they merely invest rather than become share holders) does not attract tax releif unless its falls within the remit of Research and Development.

If Company Y does not yet trade, then losses incurred from the 2 x company X's can only be considered if they are trading - I assume these are both live companies with Companies House and HMRC, but still their losses can only be offset against their future profits.

Thanks

Sam

Customer: replied 2 years ago.

Hi Sam

They are still trading and although they have big losses now, but hopefully will go on to make make big profits in the next year. If they become directors in this financial year when the company makes losses, does that not help them as high tax payers ?

Expert:  Sam replied 2 years ago.

Hi Dave

No - the current position of losses and the taking on of new directors will not help them at all - as the losses are offset against the profits OF THE COMPANY and have no bearing on salary or remunertion they might draw or be awarded as individuals

This is because ITS THE COMPANY that suffers the tax (Corporation tax) on the profits (and benefits from any losses brought forward) not the directors themselves.

Thanks

Sam

T

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