Income Tax reclaim?

[BlueNGT]

Afternoon all,

I've recently started in Self Employement November 2008. Previous to that I was PAYE and made redundant March 24th 2008.

Is there any way of claiming back some of the Tax paid in 07/08 (circa £20k)? I would guess I'd need to make a loss in order to be able to reclaim some tax paid.

I've purchased a new (new to me) used car, office equipment/furniture, Laptop etc, have spent money on refurbing the office.

Thanks in advance

[Eric Mc]

You are correct in assuming that you need to have made a net trading loss for tax purposes in order that you can offset it against your PAYE income and getting some of the PAYE tax refunded to you.

The trick is knowing how you arrive at your allowable loss.

Basically, it is your income (sales) less normal allowable business costs. In addition, you can claim Capital Allowances on the asets used by you in your business. Capital Allowances are pretty generous at the moment with small traders (like you, presumably) able to claim up to £50,000 per annum. However, cars are excluded from this basic allowance. The Capital Allowances claimable on cars are lower and based on the CO2 rating for the vehicle. The allowance should also be restricted by the Private Use adjustment (if the vehicle is used for both business and private journeys).

[BlueNGT]

Thanks for the reply.

Needing a loss my was fear, I doubt there will be one (shouldnt complain I suppose). I am a Sole Trader as you say, and I work from home so very little car use is private and its mostly attributable to Business use. I'm hoping to use the Capital Allowances for desks, Laptop, Phones, office equipment and the car (I'll need to look in to the CO2 level) purchased. Can I also offset refurbishments made to the office?

How far can one go back to try and mop up some of the PAYE tax if a loss appears further down the line?

[Eric Mc]

Losses cxan be carried back up to three years now - and carried forward indefinitely (but only carried forward against profits from the same trade).

[BlueNGT]

I may have a loss this year as I've diversified and havent earned any money since October last year.

Will I be able to go back and mop up/reclaim Income Tax paid whilst PAYE in 2007/2008 tax year if a loss arises in this years tax return?

[Eric Mc]

As you can carry losses back three years against any other income, then I don't see why you should not be able to offset these loasses against 2007/08 PAYE income. As I mentioned earlier, the important thing is to compute your losses correctly using apperoved accounting and tax methodology.