I had a question about claiming trading losses against a client's employment income.
He is a partner of an LLP which ceased trading on 31 March 2025 - this was a property rental business and before cessation he sold one of the properties so the LLP ended up making a big loss in the final year.
Can this loss be allocated against his employment income (which is not of the same trade as the LLP)?
I understand that there may be a limited of up to £50,000 or 25% of total income in the year, does this limit apply to this situation?
Only trading losses can be set against other income under s.64 ITA 2007, which I understand is the relief you are referring to.
Firstly, a property rental business is not a trade for these purposes, there are different rules for dealing with losses for property businesses.
In this case the sale of a property (which increased the loss) would also not be a trading loss nor a property business loss – it would be a capital loss so that partner’s share of the capital loss would only be available against current or future (carry forward) capital gains they make. They could not offset it against employment income.
One of my clients person A is currently a 50:50 shareholder. The other shareholder person B wants to sell his shares and no longer work with the company.
My client A now is looking at buying the shares for £22,500 from his own funds.
-It looks like an SH03 form is needed- is that right? There is a reference to HMRC authorisation codes on the letter- what is this?
-Do they have to pay 0.5% in stamp duty? And complete a stock transfer form? Is this something you do as a service?
-Then Companies House is updated to reflect the change is share capital.
Then in terms of personal tax liability for B- it looks like capital gains tax with the potential to utilise BADR- is that right?
Is any formal paperwork needed for lawyers etc?
Is there anything else that I should be aware of?
SH03 form is only relevant when a share buyback occurs i.e. when the company itself buys back the shares. In this case person A is buying the shares individually rather than from Company funds so it isn’t a “share buyback”. As it is a private share transfer between the shareholders a stock transfer form (J30) would be required. Stamp Duty would be payable as the consideration is over £1,000. The company will need to update its register of members internally and reflect the change on the next confirmation statement (or it can file an updated CS straight away).
Depending on the Articles of Association and any existing shareholders agreement (if there is one) these may need to be considered to check if any resolutions are required to approve the transfer. Sometimes a share purchase agreement is recommended to document the transaction, but this is entirely for the clients to decide and take legal advice on.
We don’t do the forms - normally a solicitor will handle this (including the stamp duty filing). This is our understanding from handling multiple exit transactions however its best to obtain the opinion of a solicitor for the legal side.
For Person B, as they would be disposing of their shares to another individual this would be subject to CGT and provided they meet the BADR conditions (which as a ‘quick summary’ are that the co is a personal trading company, they own at least 5% voting/capital, they are an office holder/employee, they have met these conditions for 2 years and not previously used lifetime limit of £1m) then they can claim BADR on the sale.
It has recently come to light that in May 2024 a client transferred a residential property he owned into a Ltd company (not his PPR). He did not realise this was a Capital gains tax event.
I am now completing his 2024/25 self assessment tax return and he has set up a Capital Gains on UK property account to report the CGT details. The 60 day reporting deadline was almost 12 months ago so this will presumably incur penalties and interest.
The Capital Gains on UK property account says the service can’t be used if the 2024/25 self assessment return has been filed. Is it better just to file the self assessment and pay the tax now and so not use the Capital gains on UK property account? Does it make any difference that the account has been set up?
As the deadline for the 60-day CGT return has passed, penalties and interest are likely to apply. Despite this, HMRC still requires that the disposal be reported using the Capital Gains on UK Property account. Submitting the details via the 2024/25 self-assessment return alone is not sufficient and does not remove the obligation to file the CGT return separately.
If the self-assessment tax return has not yet been submitted, we recommend completing and filing the CGT UK Property return as soon as possible, even though it’s late. Once that is submitted, the disposal can also be reflected in the self-assessment return for completeness.
However, if the 2024/25 self-assessment return has already been filed, and the online CGT reporting service is now unavailable, we would suggest contacting HMRC directly. They may advise on filing a paper return or provide an alternative method of disclosure, and they'll also confirm how any penalties and interest will be dealt with.
