Tax return query: Outgoings but no income.

bp1234

Hi,
I am hoping you can help me, I am just about to do my tax return online for 2010-2011 as I own a property I rent out, for that tax year however tennants moved out so it was empty for a month or so etc so I didn't make a profit.

Within the tax year I also trained to become a childminder - i have about £500 worth of costs ie training, registration fees etc however had no income from it as I wasn't able to childmind until registered. I am now registered however still no income however this is likely to change very soon. My question, I know I can include my outgoings for childminding in my tax return, however as I haven't recieved an income from it in the tax year I was training (2010-2011) is it ok to just do a tax return for my property for 2010-2011 and then this tax year (2011-12) where I will be working include the 2010-2011 training costs etc for childminding from the previous year? I have been told it is ok by HMRC to carry the costs on to next year however alot of people disagree.

Hope this all makes sense and thank you in advance for your help.

chrismac1

You should complete the property section and carry forward losses to future profits from the property, which will reduce your future bills.

Childminding
Training - see other posts on the site about this, including at least 2 of my own. It's probably not claimable as a business expense. However, registration fees and no doubt other costs in setting up will be allowable and mean that for 2010-11 your childminding business shows a tax loss.

Your main options here are:

1. Carry forward against future profits.
2. Offset this against other 2010-11 income. So if you've paid tax in 10-11 this gives you a refund.
3. Carry back to 2009-10 income, and claim tax back if you paid any in that tax year.

bp1234

Thanks, was hoping I might be able to leave the childminding tax retrun until 2011-12 as no income as made however suppose I better start looking for those receipts!

Option probably the best for me.

Thanks for your help.

chrismac1

Well you could deem them to be pre-trading expenses and hold them over to 2011-12. But if you were a client I'd want them now, less chance of some them going missing than if you wait a year.

jimmo

In your first post you said you had about £500 worth of childminding costs and chrismac 1 has correctly advised you that the training costs are almost certainly not allowable. So the amount you can claim has probably been reduced significantly.
As to whether you should enter the details on your 2010/11 Return, I completely disagree with chrismac 1.
I suggest that the correct thing to do is for you to claim those expenses as pre-trading expenditure in the year when you start trading.
The reasons I suggest that approach are twofold.
1) Income Tax
The actual date that a trade commences is a bit of a grey area but basically in order to trade you need to have, or perhaps be actively touting for, customers or clients.
Take a look at this.
http://www.hmrc.gov.uk/manuals/bimmanual/BIM70505.htm
In your particular case it is pretty clear that you were not allowed to start trading until you became registered and that seems to be pretty recently.
2) National Insurance Contributions.
If you were trading in 2010/11 you were required to register with HMRC and either start paying Class 2 National Insurance Contributions or claim the Small Earnings Exception. Rates are here.
http://www.hmrc.gov.uk/rates/nic.htm
Therefore if you declare on your 2010/11 Return that you were trading in 2010/11 you will set at least 2 triggers in the HMRC risk assessment procedures.
1) trading with no takings.
2) failure to register and correctly deal with the National Insurance issues.
Having dealt with the principles, we also have to look at the practicalities. We are really talking about amounts of money which might be significant to you and me but they are pretty small beer from the HMRC point of view and the chances are that if you declare a childminding loss for 2010/11 HMRC won’t be too bothered. However, if they are bothered there will be lots and lots of red tape for you to negotiate.
If you were one of chrismac 1’s clients he would almost certainly be able to keep HMRC off your back but you would be paying him to do so and, perhaps paying “bargain” “Investigation insurance”.
You, on the other hand, are on your own and I think your safest option would be to register your childminding business with HMRC when you get your first customer.