Tax tip

During the current economic environment unincorporated businesses might find themselves in a loss making situation – not necessarily because trading is tough – the availability of high levels of capital allowances to try and encourage capital expenditure might turn an accounting profit into a tax loss.

Whatever the reason getting relief for the loss in the most effective way is as important as ever.

The key things to consider when deciding how to use a loss include:

• Cash flow – does the relief chosen give a repayment of tax or merely a saving in the future?
• The marginal rate of tax on the income being relieved by the loss.
• The impact on personal allowances.
• The impact on benefit entitlement – including the high income child benefit charge.

Every situation must be considered on its own merits and will depend on the personal circumstances of the client – for example...