Losses and transfer of trade

Sometimes a loss making sole trader will incorporate in the expectation that the corner has been turned and the business becomes profitable or the protection of limited liability is wanted.

It is possible to transfer unused trading losses and set them against any type of income received from the company be it salary, dividends or benefits in kind.

The conditions to be met are:-

• Business must have been transferred mainly in exchange for shares (80% or more of the company’s share capital)
• You and no one else must own the shares given in exchange for the business
• The company must carry on the business for the remaining part of the tax year in which the trade was transferred, or a subsequent year.