Can I use my loss?

HM Revenue & Customs stipulate that losses may only be offset if the trade is commercial and it aims to generate a profit. Your outline of your circumstances suggests you are not optimistic of ever turning a profit, and therefore, you are unlikely to be able to offset your losses against your employment income. Instead, the losses will be carried forward and can only be offset against any profits your business makes.

It also sounds as if you need to review what constitutes a trade, before you register as self-employed. You need to consider for example, if you have ulterior motives (i.e. it's a hobby), the frequency of the paintings, the turnaround times of the paintings, and (as mentioned above) if you really hope and intend to make a profit etc.

There is no conclusive definition of what constitutes a 'commercial' basis or a 'trade'. And whilst HM Revenue & Customs provides guidance on these areas, it is in-part, a judgment call. Please feel free to contact your local TaxAssist Accountant to discuss this with you, or provide any other start-up advice.

Date published 5 Dec 2012

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.