How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3814
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

My Question is essentially, should I be recording losses in

Resolved Question:

My Question is essentially, should I be recording losses in some discretionary trusts now, to offset with some possible (but not certain) profits in the future?
My father has put a property into two discretionary trusts shared jointly by his children. I am in the lucky position of filling out the tax returns. My father (still alive) is currently paying all the running costs of the property which is a farmhouse in Northumberland and 90 acres of land which receives some rental income from fields let out to local farmers. There are some wood plantations on the land, to mature in 15 years most likely to be used to cover the running costs of the house once he has died. It's hard to see from my father's finances but the income from rented fields doesn't cover the upkeep of the land (fences, some woodland management etc). Currently I am filling out the tax returns as "nil" returns - no profit made or to declare - and therefore nothing to pay. However I am wondering if I should be declaring losses to ensure that when we do cut the trees and make a profit in that year, there are losses to offset it with?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You should most certainly be declaring any profits or losses on these holdings as unused losses can be carried forward against future trust profits. Unfortunately, since the early 60s expenditure on woodland has no longer been allowable against income from other sources. Income from timber sales is tax free anyway unless the provision of Christmas Trees for example or other short term activities are indulged in. Have a look at the notes here here for an excellent summary of the position: file:///C:/Users/The%20Big%20Duck/Downloads/taxationwood%20(1).pdf I do hope that my reply has been of assistance.
Customer: replied 1 year ago.
Hi thereOk, that makes sense but overall, to be honest, if the income from the woodlands aren't taxable anyway then I'd just as well have an easy life and just submit nil returns (less admin). Is there any downside to that - I doubt the trust would ever make a profit?FYI - the link doesn't work, so I can't see that PDF
Expert:  bigduckontax replied 1 year ago.
Interesting; I have just input the link and it came up first thump! Here are the notes: 'NOTES1 Income tax and corporation tax exemption applies to occupation of woodlands on a commercial basis. Profits are exempt from tax, and losses are not deductible against other income.2 Tax exemption applies to felled timber down to planking stage, but not further processing.3 Cultivaton of short rotation coppice is treated as farming, and therefore taxable, from 29 November 1994.4 See Jaggers v Ellis (1996) SSCD 440. 5 Profit from the sale of trees is exempt from capital gains tax.6 Where woodlands are sold, the selling price and the original purchase price are apportioned between the land and the timber. Any gain on the land will be reduced by taper relief.7 Commercial woodlands qualify for 100% business property relief, subject to normal rules.8 Woodlands relief is not now likely to be relevant because of the availability of business property relief at 100%. Where it was previously claimed, the value of timber was excluded from an estate on death. The subsequent sale of timber leads to an inheritance tax charge.9 The sale of timber is a normal standard rated supply.10 The granting of the right to fell and remove timber is a specified standard rated supply.11 The sale of woodlands is an exempt supply of land, except that it is standard rated where the owner has exercised an option to tax.' I see your point regarding the exercise in financial futility of departing from the easy life. However, HMRC do not look at such matters in the same rosy light. Trusts and even worse investment in woodlands are considered close to a racket by that Department and by failing to submit full figures you could be entering a Tom Tiddlers ground of endless argument with that organisation. I have a client who has just had imposed penalties of GBP 1500 for failure to submit EU Sales Lists which are only maintained for statistical purposes by HMRC anyway. His software will not do them and both HMRC and the software suppliers admit this, nor did HMRC request submission. The case is now progressing to a VAT Tribunal.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support. You could, of course, raise the matter with HMRC by letter and might be told not to bother, but until that happens just have a care.

Related Tax Questions