SET LOSS AGAINST EARLIER PROFITS
BN writes: I own a small estate agent’s office that has been trading at a
loss for several months. I understand that I can carry back losses to an
earlier period and recover some of the tax paid in the previous year. Is
there anything else I can do?
Businesses have always been able to carry back trading losses to an earlier
period and relieve them against previous profits,writes Chris Lane, a
partner at Kingston Smith LLP. But in the last prebudget report the
chancellor announced a temporary extension to the rules, allowing businesses
to carry back trading losses to the previous three years. This extension
applies only to losses arising in accounting periods ending between November
24, 2008 and November 23, 2009 and the rules are slightly different for
companies and unincorporated businesses.
Companies can offset trading losses against profits for the preceding three
years. The total losses that can be carried back to the first two years are
capped at £50,000. Any loss that is carried back can be offset against any
profits – not just trading profit – and the relief can be claimed in the
company’s corporation-tax return.
Unincorporated businesses can normally relieve losses against general income
in the loss-making year and general income in the previous year. Any
unrelieved losses in the tax year ending April 5, 2009 can now be relieved
against the profits in the previous three tax years. The relief must be used
against the latter years first and it is also capped at £50,000.
A claim under these new rules can be made as soon as the losses for the basis
period for the tax year ending April 5, 2009 have been calculated. But HM
Revenue & Customs has said that any repayments will not be made until
after this year’s budget. Also the rules do not appear to require
unincorporated businesses to first use the losses against other income in
the same year. This means that, where appropriate, personal allowances can
be preserved and used against other income.
MOVING STAFF TO A DISTANT FACTORY
JP writes: We have three small production units and business has gone quiet
at one of them. Can I temporarily lay off staff until business increases or
should I send the staff to the other units in the hope that the work can be
spread evenly. The second unit is 40 miles away, so will I be expected to
pay travel expenses?
Whether you can make layoffs will depend on your contracts of
employment,writes Peter Done, managing director of Peninsula. If you have a
contractual right to lay off staff, you can invoke this clause. You need to
bear in mind that if you lay off staff for four consecutive weeks or for six
weeks in any 13-week period then they can give you notice of their intention
to claim a redundancy payment.
There is little point in moving staff to other sites unless there is work
there. Have you considered whether you can spread the existing work over the
three units rather than moving the workers?
You need to look at your staff contracts and see if you have a mobility
clause. If you have the right to move staff, this is an option you can
consider and you will not necessarily have to pay travel expenses, though it
would be worth meeting any that are unusually high.
It is not simply a question of the distance between the outlets, but rather
the distance your employees will need to travel to attend work and how they
make those journeys. Their transport method to their normal place of work as
well as other commitments outside work, such as childcare, may mean that
they cannot cope with this change.
Discuss the matter with your staff. They are more likely to work with you to
resolve the situation if they are involved in the process.
Kingston Smith LLP, the chartered accountant, and Peninsula, the
employment-law firm, can advise owner-managers on their problems. Send
questions to The Business Doctor, The Sunday Times, 1 Pennington Street,
London E98 1ST, or fax to 020 7782 5765. Advice is given without legal
responsibility.
bizdoc@kingstonsmith.co.uk
