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sole trader loss, sipp contribution & drawdown

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Notascoobie
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Joined: November 19th, 2016, 4:49 pm

sole trader loss, sipp contribution & drawdown

#30217

Postby Notascoobie » February 9th, 2017, 6:27 pm

Sorry for the vague title, but a 2 part question.
1)As a sole trader, if I make a loss, I believe I can carry that loss forward to future tax years. Is that correct? Not sure if the cause of the loss is relevant but it was due to repayment of a business loan (allowable expense?)

If the above is ok, then I have no profits for tax year 16/17 and as such have not used any of my personal allowance of 11000.

2)As I have a SIPP in flexible draw down I wonder if I can contribute the £3600 that everyone is allowed made up of my contribution of £2880 + the tax mans contribution of £720. Then withdraw 25% of the £3600 ie £900 as a tax free lump sum and up to another £11000 to fully utilise my personal allowance for the year?

Would appreciate anyone pointing out obvious flaws in this approach.
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swill453
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Re: sole trader loss, sipp contribution & drawdown

#30225

Postby swill453 » February 9th, 2017, 7:05 pm

Notascoobie wrote:2)As I have a SIPP in flexible draw down I wonder if I can contribute the £3600 that everyone is allowed made up of my contribution of £2880 + the tax mans contribution of £720. Then withdraw 25% of the £3600 ie £900 as a tax free lump sum

Yes you can withdraw tax-free up to 25% of any uncrystallised funds in the pension.

Look out for charges though. Some providers might charge up to, say, £100 to crystallise a bit of pension and pay you the tax-free 25%. That's a big chunk out of £900. You could always let a few years accumulate then make bigger "crystallisation events".

Notascoobie wrote:and up to another £11000 to fully utilise my personal allowance for the year?

Yes that would be fine.

(Don't know answer to self-employment question).

Scott.

Notascoobie
Posts: 8
Joined: November 19th, 2016, 4:49 pm

Re: sole trader loss, sipp contribution & drawdown

#30230

Postby Notascoobie » February 9th, 2017, 7:24 pm

Thanks Scott
I'm with youinvest so had a quick look at the charges that might apply and found this:

[i]One-off payment of a tax free lump sum, income payment, uncrystallised funds pension lump sum or small lump sum £25
Regular income drawdown payments or regular uncrystallised funds pension lump sum payments £100 pa[/i]


Not quite sure if I could opt for the first option and pay £25 each for the UFPLS and income payment.

swill453
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Re: sole trader loss, sipp contribution & drawdown

#30235

Postby swill453 » February 9th, 2017, 7:31 pm

Notascoobie wrote:Not quite sure if I could opt for the first option and pay £25 each for the UFPLS and income payment.

As you've described it, it wouldn't be a UFPLS, it would be a "One-off payment of a tax free lump sum". Still £25 though.

If you had/have more of your fund uncrystallised, then you'd be able to combine the tax free lump sum and the income payment into a single UFPLS, for a single £25 charge.

Scott.

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Re: sole trader loss, sipp contribution & drawdown

#30237

Postby PinkDalek » February 9th, 2017, 7:54 pm

Notascoobie wrote:Sorry for the vague title, but a 2 part question.

1)As a sole trader, if I make a loss, I believe I can carry that loss forward to future tax years. Is that correct? Not sure if the cause of the loss is relevant but it was due to repayment of a business loan (allowable expense?)

If the above is ok, then I have no profits for tax year 16/17 and as such have not used any of my personal allowance of 11000.


You have a number of options for trading losses and, broadly, these are (I think):

1. Against other current year taxable income (even chargeable gains).

2. Against taxable income in the prior year.

3. Carried forward against future profits from the same trade.

In more detail here (which is looking at losses incurred in 2015-16) https://www.gov.uk/government/publicati ... osses-2016 but the explanations don't appear to be as good as when I last looked at similar pages at HMRC in the past.

However, I don't understand why you think the "repayment of a business loan" will create a trading loss. It sounds like the settlement of a liability rather than a trading expense. Presumably you've already accounted for the expenditure the loan enabled. Unless this is in some way to do with cash accounting.

Perhaps you could explain in more detail.

Notascoobie
Posts: 8
Joined: November 19th, 2016, 4:49 pm

Re: sole trader loss, sipp contribution & drawdown

#30367

Postby Notascoobie » February 10th, 2017, 11:33 am

Re the trading loss.
I operate as a private hire taxi driver with my own car. The loan was for the purchase of the vehicle and as such the repayments were an allowable expense. All I have done is repay the outstanding amount early, which when combined with my other operating expenses will result in a trading loss.

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Re: sole trader loss, sipp contribution & drawdown

#30480

Postby PinkDalek » February 10th, 2017, 5:23 pm

Notascoobie wrote:Re the trading loss.
I operate as a private hire taxi driver with my own car. The loan was for the purchase of the vehicle and as such the repayments were an allowable expense. All I have done is repay the outstanding amount early, which when combined with my other operating expenses will result in a trading loss.


The correct treatment is beyond my current knowledge as I don't know enough about Loans and interest thereon nor capital allowances (writing down allowances or initial allowances) and their interaction with mileage allowances etc. Nor do I know the position if you are using the cash basis of accounting (which I mentioned earlier but you didn't confirm one way or the other).

As you queried the relief in your OP saying "due to repayment of a business loan (allowable expense?)" and if you don't get a knowledgeable reply on here (DAK), might I suggest you take this part of your question to "Taxes Practical Issues" in the hope that someone there can assist:

viewforum.php?f=49

If you do take it there, it might help if you gave far greater detail on the exact purchasing arrangements, such as the type of finance provided to you (such as HP), and whether or not you already claim mileage allowances.

Notascoobie
Posts: 8
Joined: November 19th, 2016, 4:49 pm

Re: sole trader loss, sipp contribution & drawdown

#30538

Postby Notascoobie » February 10th, 2017, 10:15 pm

PinkDalek
Thank you for your comments and observations. It appears I have made some pretty major errors in the way I have been accounting for the loan that I am not quite sure how to rectify. I have however started another thread over on the Taxes board as you suggested.
Regards
Notascoobie.


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