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If a partner has just joined or If a sole trader is planning to join some one and form a pertnership due to losses occoured so how can the new partner set off his loss in the previous tax years. It’s actually a solution to a question in kit Q#29 of kaplan?
If a new partner joins a partnership or an individual joins an existing sole trader so as to form a partnership, then the new partner / individual joining that business will be treated the same as any sole trader commencing a new business and will be assessed using the bases of assessment applicable in the opening years.
If a loss then arises then the new entrant to the business will be able to claim the specialist opening years loss relief in addition to the normal set off in the current and/or preceding tax years or the c/f of the loss.
The existing partners / sole trader will not be eligible for the specialist opening years relief unless they too are still within the 4 tax years from when they started trading.That means we don’t have to actually do any calculations for setting it off against any preceding tax year in exams.This is just up to tax planning purpose. Am I ri8?
What you have to do depends entirely on the precise wording of the question! It is usual for questions to ask you to EXPLAIN how the loss may be used which simply means to state what options exist and what they allow you to do along with any advantages or disadvantages that attach to these options, for example saving tax at higher rates, avoiding wasting the PA, gaining relief at the earliest opportunity, Such a question would not require you to do any calculations.
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