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bigduckontax, Accountant
Category: Tax
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, I am an Oil & Gas Consultant who currently has a limited

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I am an Oil & Gas Consultant who currently has a limited company in the UK. I am VAT Registered. I have recently been told that due to the oil price my contract is to be cancelled. So upon this news I have been investing in a business at home that I can do myself. I have purchased a garage for 20000 pounds and I am in the process of purchasing equipment to start up.
My question is, can I get any kind of tax relief due to the fact I am investing in a business for trade for myself and perhaps offset some of the money I have invested against my coming corporation tax bill? As I have been finished from my current contract and heavily investing in my new venture I might be tight for the amount I owe this year.
Hello, I'm Keith and happy to help you with your question.
The answer to this question is as long as the proverbial piece of string! However, I will try to unravel the situation for you. I will work on the assumption that you are passing all this business through your company, or are you stating a new business self employed?
Please advise, then I can push forward with my advice.
Customer: replied 3 years ago.

Yes i am self employed. Yes all the investment for my new business is going through my existing limited company. The business i am starting is for me to do and not to buy into.

The Oil & Gas industry is on it's knees at the moment due to the Oil Price so i am doing this for myself to move away from Oil & Gas. Hope this helps

I never thought that money spinner would ever go down the tubes!
All this investment will be capital items in your company. Thus the relief you receive would be through the means of Capital Allowances (CA). The first bad news is that buildings do not qualify for CAs. All the equipment you buy will, however, and under current rules for Annual Investment Allowance (AIA), providing the expenditure does not exceed 500K this can be offset. AIA is at 100%.
How it works for Corporation Tax (CT) is pretty simple. You take the trading profit or loss at the years end, then deduct CAs to derive a figure subject to CT. If this produces a loss then this loss can be carried forward. Here is the Gov UK's advice on carrying losses back against earlier years:
'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.'
You will appreciate that this rule nay well debar you from a carry back leaving losses to be carried forward. Always 'Jam yesterday, jam tomorrow, never jam today,' I regret, typical taxation. You suggest that money will be tight to meet last year's tax assessment so why not a short term loan secured on the garage premises to tide you over; just a suggestion. Any loan interest payable is allowable against CT.
I do hope I have shed some light on your position. If you are going self employed and not through your company remember that if you have a loss carried forward and are not making profits you will receive no tax relief from your CAs. Also you must inform HMRC that you are going self employed and register and they will arrange for you to receive a return annually for completion.
Customer: replied 3 years ago.

I am aware of capital expendature. I think you might have miss understood me. I am a limmited company now and plan to stay that way. My new business will be the same limited company. I guess you could call it a transition from one service to another. The reason i want to stay limited company is because i have everything already set up, have a good relationship with the bank and wish to continue with the way i have been over the past two years. My question was, can i offset the cost of the building and the answer is no. I refuse to take loans because that leads to a spiral of debt. While i have you, if i can prove that i am buying items for my new business from my personal money from, Let's say ebay, can i reimburse myself from the business bank account and claim this as plant & Machinary? I am aware of the 500k yearly capital investment. Thanks

Yes, you can, you are merely refunding moneys to yourself from the company which have been properly expended on its behalf. There are no tax implications for you personally in such a transaction. Ensure that you keep adequate supporting evidence of purchases.
If you can wriggle the loss through a carry back then the company's cash flow would be improved if you had to pay CT last year, but I doubt that it would be possible.
There is a further long term snag too. When the company comes to sell the building, should it make a gain then that gain will be brought into the trading account as an exceptional profit. It's a classic example of Benjamin Franklin's dictum that in life there are but two certainties, death and taxes.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4807
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Thank you for your support.
HiSorry to interject but if you choose to go down the route of paying for the items yourself and then claiming a reimbursement from the company then you crate a benefit situation, which you must advise HMRC on through the annual P11db return - and then complete a P11d for yourself - then as the items you would have been reimbursed upon ARE all wholly and exclusively for business - then you claim an expense position under S226 - to HMRC along with the P11d - so that you do not get charged tax on this money - (because its all business) its a very convoluted way of doing this, and an easier route might me asking HMRC for a dispensation IF the amounts are small and infrequent and are day to day expenses- but I suspect this may not be the case (and certainly you do make reference to capital items) - so if possible let the business always make the purchases ! I have added a link here re the need to file a P11db return and its the booklet 48- - which covers all types of payments where either a benefit is provided or seen to be provided, and this falls within a purchaser you make for the company and then claim the money back and does not fall within the NIL reporting requirements (such as business mileage under 45p a mile for the first 10,000 miles or a mobile phone etc!) Thought you had best get it right from the off with this change of trade (which also if you were VAT registered you do need to inform HMRC VAT and regardless of the VAT position inform HMRC (Corporation Tax) of the change of trade classification) ThanksSam