In the early days, your Network Marketing business may not be making a profit and therefore incur a loss. Making a loss simply means that expenses are greater than your income. Whilst business owners would all love to make a profit from the outset, it is very common to incur expenses and make a loss whilst getting your business off the ground.
The good news is that you can offset your losses in a number of ways. How you do this and what your options depend on what business structure you have – whether you’re a limited company, sole trader, partnership or LLP. As most of our Network Marketing clients operate as sole traders or partnerships, we will focus on these business structures.
There are different ways in which you can utilise your losses:
- Against future profits of the same trade so that you pay less tax in the future
- Against any other income of the same tax year (e.g. employment income) – if you’ve paid tax on that income you will be eligible to receive a tax refund on the losses that are offset
- Against income of the previous 3 tax years (for the first 4 years of the business) – again, – if you’ve paid tax on that income you will be eligible to receive a tax refund on the losses that are offset
The caveat to this is that your business needs to be genuine in the eyes of HMRC i.e. you must be trading with a view to making a profit under the Income Tax Act which means you would need to spend at least 10 hours a week on the business.
As part of our Helpline Service we ensure that any losses are utilised in the most tax-efficient manner for you.
If you would like expert advice on how to offset trading losses, please contact our team on 01444 458252 or firstname.lastname@example.org.