offset self employment loss against paye

assj wrote: »

Ok so I'm a bit thick.

I'm trying to find out how to do the above

1 to see viability

2 to see what I'm owed or will owe

For starters:-
No you're not thick, this can be quite complicated.
The loss must be from a business, not rents.
It must be a loss for the period ended in the year to 5 April 2011
Just complete your tax return, don't for get to tick rthe box to claim the loss against other income.
The software should calculate the answer.

So your partner was self employed as a sole trader during the year the business made a loss but now you are a partner and the status of the business has changed from being "sole trader" to "partnership". Do I have that right? If so I do not think there is any way you can claim the loss incurred for the year when the business was in the name of your partner as a sole trader to be offset against your PAYE income for a later year. However, on the other hand, the loss incurred could be carried back and claimed as "loss relief" and set against any profits on which tax has been paid for earlier years which might produce a repayment, assuming your partner has settled in full the liabilities for the earlier years. If there were no profits against which the loss could be set for earlier years it might be available to carry forward to set against profits of the business for later years, reducing the amount of tax payable for later years. There are time limits to make claims for the carry back or forward of loss relief, information on which will be provided by HMRC on request, but you might require professional advice from an accountant if the situation is more complicated.

I concur with the previous poster that if things get complicated, use an accountant - you can easily muck it up by yourself.

Secondly, I hope that the business on which you are claiming the loss relief was a legitimate trade i.e. carried on with a view to realising a profit. HMRC can disallow a claim for loss relief if they believe that the enterprise had no realistic chance of making a profit. For example you must work for at least ten hours per week in the business which is carried on with a view to a profit - otherwise they could view it as hobby income and bang goes your loss relief!