Accessing losses for Corporation tax benefits
Mr Smith is the sole owner of two limited companies, A Ltd & B Ltd.
A is well established and makes profits of c. £100,000 almost every year.
B Ltd is a relatively new company which has great prospects, but for the foreseable future it will make losses of c. £50,000 per annum.
Understandably, Mr Smith is hoping that the losses in B Ltd can be offset against the profits in A Ltd, leaving him with net profits of £50,000 and a Corporation Tax liability of £10,000 rather than £20,000. That would certainly ease the burden on cash flow until the revenues from B start to come on stream.
Unfortunately, profits from one company can only be offset against those in another company when they are part of the same ‘group of companies’, and as Mr Smith isn’t a company there is no ‘group’ for the purposes of Corporation Tax and therefore no loss relief.
Fortunately, SMH are able to advise how to create that group, without Mr Smith losing any control of either company and without incurring a tax liability
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