Tyler Lappage
ACCA

We were asked a good question through our free advice clinic recently. The lady who contacted us is running a successful business (self-employed) as a proof reader which makes a profit every year. She is trying to start a second business as a holistic therapist. The therapist business is just starting out and is making losses while it gets off the ground. In order to give the therapy business a boost, she does some volunteer work to help increase her profile.The questions (and answers) are:

Q. Can the losses from one business be off-set against the profits of the other business?

A. Yes, as long as the losses and profits were made in the same year. It is not possible to off-set losses in one year to a ‘different trade’ profits in an earlier or later year. If losses are carried forward or carried back, they can only be off-set against profits of the same trade.

Q. Can the expenses incurred as part of the charity work be claimed against the income from the commercial part of the business?

A. Yes (sort of). The only expenses that can be claimed on the tax return are expenses that are incurred ‘wholly and exclusively for the purpose of the trade’. There needs to be a realistic chance of gaining new business through this charity work. A case could be made that the marketing and advertising benefits of doing this work are essential to the success of the business. HMRC may have a different view, but that’s up to them. Each case is different and should be looked at on an individual basis.

If you are unsure about what expenses can be claimed or how to best utilise losses, please feel free to get in touch with us.

Nabarro Poole does not accept any liability for actions that readers may take and recommends obtaining specific professional advice before action.

For more information, please contact us through our website: www.NabarroPoole.com