UKC

If I had a limited company that has spent more money on equipment that the year's profit/turnover can the loss be carried forward to the next year? Year 1 of the business.

In reply to estivoautumnal:

Yes
https://www.gov.uk/corporation-tax-calculating-and-claiming-a-loss

In reply to estivoautumnal:

And it's worth a years 2?

What is the equipment, depending on what it is it might be possible to capitalise it and spread the write down. ideally passing costs into the realistic year of useage.

In reply to John Lewis:

Thanks for the replies.

It's video and lighting equipment for a production company.

In reply to estivoautumnal:

Absolutly then, set a depreciation strategy, years and mode of depreciation

In reply to John Lewis:

If it's capital equipment, the write down for accounting purposes (via depreciation) will be spread over a number of years (usually 3-5). You cannot claim tax relief on depreciation.

However you can claim capital allowances.....

For tax purposes the option claim a 100% first year allowance via the Annual Investment Allowance (AIA) is the most likely (and tax efficient) option. By claiming the full 100% you get full relief in the year the expenditure was incurred.

Any trading loss arising in the period can be carried forward indefinitely against profits of the same trade. A loss carry back is also available to prior years, but as this is Year 1 of trading, it obviously doesn't apply in this case.

In reply to John Lewis:

That's the answer I was hoping for. Seeing an accountant next week so will get full advice then.

In reply to estivoautumnal:

The loss for tax purposes will not necessarily be calculated as incomes less expenditure if some of the expenditure is on equipment which should be treated as fixed assets for ongoing use in the business.

For fixed assets you would typically only be able to expense a certain amount of the cost in each year, based on capital allowances rates (see http://www.hmrc.gov.uk/capital-allowances/basics.htm). For certain categories of assets you are able to charge the full expense in the year of acquisition (called first year allowances - see http://www.hmrc.gov.uk/capital-allowances/fya/basics.htm). However, there's also an Annual Investment Allowance (see http://www.hmrc.gov.uk/capital-allowances/plant.htm) which, depending on how much you've spent, may mean you could expense all of your costs and then carry forward any residual losses.

Depending on how much you've spent and on what, this may mean that, for tax purposes, you haven't actually made a loss (which may be a good or bad thing, depending how you look at it!).

The HMRC website actually has quite a lot of good guidance, but tax can be a bit of a minefield...

OM

In reply to Owen Meany:

Thanks for that.