CLASS 4 NIC And Trading Losses - Check The Software
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your farming clients overpaid Class 4 NIC?
Or more importantly, have they not obtained a
repayment they may be due?
4 NIC rates increased in 2011 and this helps
highlight the “tax” planning opportunity of the offset of trading
against the Class 4 NIC liability.
can be of particular importance with regard to the farming industry.
current rates of Class 4 NIC are as follows:
4 lower profits
£7,225 per year
4 upper profits
£42,475 per year
4 rate between
4 rate above
upper profits limit
should be noted
that the Class 4 and trading loss interaction is something that not all
software packages charged with the task of producing tax returns
identify. It is
therefore worthwhile checking all loss
making clients with Class 4 liability.
repayment can arise
when the taxpayer has claimed loss relief against non-trading income or
gains. Losses not
used for Class 4 NIC
purposes are carried forward and used against the first available
liable to Class 4 from the same trade as mirrored in the loss provision
to set off for Class 4 purposes only are deducted on the Tax Return
self-employment (full) pages at box 101.
Those taxpayers who
would otherwise complete the self-employment (short) pages are unable
to do so
if they wish to claim this relief as there is no similar box on the
must be kept for unused losses to be carried forward against future
profits and also how losses have been used against Class 4
liabilities. It can be argued that many
advisers find it
difficult controlling how farm losses have been utilised for farm
purposes, let alone Class 4 NIC. A
of how Class 4 losses have been utilised should be made in the
information box on the Tax Return to keep HMRC informed.
increased cost of
Class 4 NIC may push many diversified farming activities into the
“arms” of a
limited liability company, where the profits are taken by way of a
dividend. This is
now even more
attractive following the reduction in the small companies rate of
tax from 21% to 20%.
About the Author
Supplied by Julie
Butler F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire,
01962 735544. Email;
Julie Butler F.C.A. is the author of Tax
Farm and Land Diversification of
which the 3rd edition is to be
published shortly (Bloomsbury
Professional), Equine Tax Planning ISBN:
0406966540, and the forthcoming
Stanley: Taxation of Farmers and
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Article Published/Sorted/Amended on Scopulus 2011-10-25 14:58:18 in Tax Articles