Tax Help for Losses and Falling Sales

If your sales have dropped and costs have risen, you may be making a loss. This is not a disaster, but you should take action soon to get the best out of the tax system at this difficult time.

VAT

Where your turnover for the last 12 months has dropped below £70,000 you could deregister for VAT. This will not suit all businesses, but if you sell to the public you may gain a competitive advantage by being outside the VAT net.

Loss Claims

Once you have a definite loss figure from your accounts you can set this against your profits for the previous year to generate a tax repayment or tax reduction. If the current loss exceeds the previous year's profits you may be able to carry the excess back a further two years, but this depends on when your loss making period ended. You may need to change your accounting period slightly to accelerate the loss relief available.

Tax and Pension Credits

If your business is your main source of income, a loss means you may be eligible to receive Tax Credits. Tax credits are particularly valuable for families with children under the age of 16 or who are in full-time education, but single individuals can also claim. Your claim can only be backdated up to three months, so you need to make sure you don't delay making a claim. If you are aged 60 or over you may be able to claim Pension Credit. You don't have to be retired to claim this support and it is a much simpler system than Tax Credits.

However your trading loss arose, the best policy is to make sure you act quickly to reduce the business tax payments and generate tax refunds. The worst thing you can do is put your head in the sand!

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