If your sales have dropped and costs have risen,
you may be making a loss. This is not a disaster, but you should take
action soon to get the best out of the tax system at this difficult
time.

VAT

Where your turnover for the last 12 months has dropped below £65,000
you could deregister for VAT. This will not suit all businesses, but if
you sell to the public you may gain a competitive advantage by being
outside the VAT net.

Loss Claims

Once you have a definite loss figure from your accounts you can set
this against your profits for the previous year to generate a tax
repayment or tax reduction. If the current loss exceeds the previous
year's profits you may be able to carry the excess back a further two
years, but this depends on when your loss making period ended. You may
need to change your accounting period slightly to accelerate the loss
relief available. Ask us to help you get your accounts finalised as
soon as possible.

Tax and Pension credits

If your business is your main source of income, a loss means you may
be eligible to receive Tax Credits. Tax credits are particularly
valuable for families with children under the age of 16 or who are in
full-time education, but single individuals can also claim. Your claim
can only be backdated up to three months, so don't delay making your
claim. If you are aged 60 or over you may be able to claim Pension
Credit. You don't have to be retired to claim this support and it is a
much simpler system than Tax Credits.

However your trading loss arose, the best policy is to act quickly
to reduce the business tax payments and generate tax refunds. The worst
thing you can do is put your head in the sand!