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New Start Up - 50 Or 40 Percent Relief


Julie Butler - Expert Author

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Published on 5th August 2010

When any new business starts to trade and creates a loss it has the ability to carry the first three years of losses back against earlier total income.

In a stud situation where it is accepted that it can take 11 years in which to make a profit the first three years can result in some quite heavy losses.  These could have arisen through the problems and concerns of repairs to the property as opposed to improvements and some writing down of stock where stock values have fallen and just general running expenses where there is little income as stud stock has not been sold.

The question that a high earner who also runs a stud has to consider is should they carry back the loss and achieve 40% tax relief or set it off against current earnings and achieve 50% tax relief?  Previously there was no such dilemma and it was normally good housekeeping or general acceptable policy to carry back the losses to the furthest point so that all tax paid subsequently was available for offset if needed.

This raises an issue concerning loss utilisation.

The whole issue of stud losses is an important area and it is key to keep a loss memorandum so that the ability to claim these losses against other income is protected.

The action plan is to look at the earnings for the past three years and to see how these can best be utilised against the current earnings.  It is also essential to predict future losses to see that there will be enough income to offset if the 50% relief is taken in the current year.

About the Author

Article supplied by Julie Butler F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire, SO24 9BH.  Tel: 01962 735544.  Email;, Website;

Julie Butler F.C.A. is the author of Tax Planning for Farm and Land Diversification ISBN: 0754517691 (1st edition) and ISBN: 0754522180 (2nd edition) and Equine Tax Planning ISBN: 0406966540.  The third edition of Tax Planning For Farm and Land Diversification will be published shortly.

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Article Published/Sorted/Amended on Scopulus 2010-10-22 10:48:13 in Tax Articles

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