Advice on taking over friend's business which has £50k declared losses to write off against profits?

mikeprice

A friend of mine runs a business which is similar to mine, in a related but not identical sector. She has been running it for a decade and run it at approximate £5k declared losses each year, which means it has £50k in losses now.

On Companies House it states that there has been an "Application to strike the company off the register" and a "First Gazette notice for voluntary strike-off". I explained to her that there may be benefits in him keeping the company active, to be able to write-off the losses against future taxes; however, he's feeling low due to his long-term inability to generate a profit and he's not interested at all.

I have done some basic studying of the HMRC rules in terms taking over a company which has declared losses and then using them to write-off future taxes payable. As with everything, HMRC are very much of top of matters and have very detailed and complicated stipulations in terms of what is/is not possible in such a scenario. To be frank with you, at lot of is above my head.

The other benefit is that a ten year old company, even with losses, has a better reputation than a newly-registered one. The downside, as I see it is, is that the First Gazette strike-off notice will always be on the Companies House listing, and not look very professional.

Does anyone have any insight into whether it is worth me asking my friend if I can take over her company to be able to write-off taxes against the £50k of losses (otherwise, I may as well register a brand new company whenever I need to)?

If I do so, I've thought of offering my friend some money to be fair to her.

Thoughts please?

Thank you.

Pennywise

Have you checked HMRC's rules about the availability (or not) of losses to set against future profits after there's been a change of ownership and change of trading activity??

Savvy_Sue

And, I'd have thought, definitely one to take advice from an accountant, possibly also a solicitor...

mikeprice

Thanks for the responses.

Yes, checked HMRC rules. Apparently one can offset losses?

Any thoughts?

pjcox2005

Pennywise said:

Have you checked HMRC's rules about the availability (or not) of losses to set against future profits after there's been a change of ownership and change of trading activity??

Where you have a change of control and change in conduct or nature of the trade then those losses are forfeited so you'd need to look at how related that business is to see if it results in change in conduct or nature. Technically if you were to change, so no cease all activity with their existing clients etc then you may fall foul of these although chance of challenge from HMRC is low.

There is also the question of someone running a business at a loss for years, are there any creditors which could have a claim as you'd be responsible for those (via the company) once you own it.