Still in loss so why taxed on single-year profit?

Still in loss so why taxed on single-year profit?

10:52 AM, 27th June 2016, About 9 years ago 14

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I have submitted my tax return (SA100/SA105 etc) for 2015-16, which is the first year for which I have made an ‘in-year’ profit (around £5k) – so that’s the number in Box 38. However, this has really only reduced my cumulative losses (from brought-forward £20k loss up to April 2015, i.e. the Box 39 figure, to become carried-forward loss of £15k at April 2016, i.e. the Box 43 figure). So that’s still a zero in Box 40, “Taxable proifit for the year”.losses

Now, I always thought that I would not start paying tax on property profits, until I started to make a CUMULATIVE profit, i.e. after offsetting losses against profits, for all years starting from the first year – NOT merely the first time an in-year profit occurred [unless that had wiped out all the cumulative, brought-forward losses, which is not the case here].

HOWEVER, I am also an employee; and I have just received an amended tax code for the current year, which treats this £5k (the Box 38 amount) as an amount to be taxed over 2016-17. The HMRC said that it only looks at one year’s figures at a time; so I am now confused as to (a) what is the point of keeping track of past losses anyway if HMRC are NOT letting us offset these against future profits; and (b) why is Box 40 so misleadingly labelled as “taxable profit”, if the profit that they ACTUALLY tax us on is a completely different amount?

No doubt I am missing something here, so I would be most grateful if someone could explain how this is ACTUALLY supposed to work.

Many thanks, folks.

Adrian


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Neil Harvey

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14:13 PM, 1st July 2016, About 9 years ago

Adrian, re your question "Would you please explain the mechanism by which I communicate, through my tax return next year, “Hey, you’ve already wrongly taxed me on this £5k from 2015-16”?"

I don't think you need to tell them per se. You will do your next tax return, you put in your earnings, property profits, capital gains etc etc, and you come up with a taxable income for the year (with various bits split out into their own lines, like capital gain, interest etc). Ignoring the PAYE tax code which is irrelevant in the tax return, but taking into account the tax allowances you are entitled to, they system works out your total tax liability. It then compares that to what you paid through PAYE, and you pay the extra or you get a rebate. In your case, ignoring other tax topics you may have, you will probably have overpaid through PAYE and therefore will probably get a rebate

Fed Up Landlord

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10:10 AM, 2nd July 2016, About 9 years ago

I have carried over losses for the past 8 years even though I have made a profit and never paid any tax until I actually make a cumulative profit over that period. Get an accountant. It costs me £600 a year and they save me at least that and more.

Michael Barnes

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14:47 PM, 2nd July 2016, About 9 years ago

Reply to the comment left by "Adrian Brown" at "27/06/2016 - 13:26":

Sounds like HMRC have cocked up.

Help line staff know nothing about the tax system, only about administrative stuff.

phone again and ask to talk to a tax inspector, OR phone the office that deals with your tax return (number should be on the paper return they sent you)

Adrian of Leigh

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18:58 PM, 13th July 2016, About 9 years ago

Good news: I 'wrote' to HMRC, actually filled out the 'Contact Us' form on the website, briefly explaining the position (in a couple of sentences). Fair play, they have now written to advise me of a new Tax Code which, correctly, IGNORES property income. It seeme they 'happily' accepted the argument that as I wasn't going into 'cumulative profit' (i.e. after subtracting cumulative past losses) for at least a couple of years, I shouldn't yet be taxed on what I did make last year.

Many thanks again to all contributors / commenters on this thread - I hope this all also helps other folk in the same position!

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