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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15835
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I was a director and shareholder in a business that

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Hi

I was a director and shareholder in a business that today went into liquidation. I invested about £10k in it in terms of direct loans and unpaid expenses, and I also was owed £3000 salary from the 2012-13 tax year (PAYE and NI was paid on this amount).

I need to know how to approach making a claim for tax relief against earnings going forward? And also whether I am entitled to claim against the NI fund for unpaid salary, or if that would be the best thing to do even if I can? I also worked mostly for free during the year that the business was running, and therefore spent a further £20k (est) on living during that time, and I do not know if that counts for anything.

Any help much appreciated

John
Hi.

Where an employer goes bust and is unable to pay statutory redundancy, the government will pay that and up to 8 weeks wages. Take a look here for more information on this.

The only tax reliefs you can claim are for your loans to the company and for the loss of your investment in your shares in the company.

As far as the loans are concerned, you can only claim a capital loss which can only be relieved against capital gains you make. Take a look at the HMRC helpsheet HS296 here for more information on this.

As for your shares, you can claim a capital loss which can be used against capital gains you make. So long as you subscribed for new shares in a qualifying trading company, you can claim income tax relief for the loss of your original investment in the shares. Take a look at the HMRC helpsheet HS286 here for more information on this.

There are no reliefs available for your personal living expenses as they have nothing to do with your business.

I hope this helps clarify matters but let me know if you have any further questions.
Customer: replied 3 years ago.

Hi Tony


 


Thanks for your reply. I have one further question - presently I am in full time employment on PAYE. It sounds as if I am unable to declare my capital losses against tax due from salary, yes?


 


However, I also have a consulting company which pays me dividend income - can I claim my capital losses against that?


 


Rgds


 


John

You cannot claim the loss of the loan monies against any form of income I'm afraid.

You can claim income tax relief against any form of income for the loss of your investment in the shares which may be very small if you started the business from scratch. However, if you are a basic rate taxpayer, none of the notional tax credits on dividends will be repayable under any circumstances. The loss would only serve to reduce any liability to higher rate tax on dividends.
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