You're still wrong I'm afraid
An IT contractor owns a business called ABC. ABC is set up with companies house as carrying on the business of contracting services. His accounts are prepared as such. Income is contracting income.
if you are now saying that ABC is ALSO carrying on the business of trading, he would need to change the memorandum and articles of association to reflect this and filed with companies house. and his income would be classed as income from contracting, and income from trading separately, his accounts would also be prepared as such..net profit from contracting, net profit from trading.
now, when HMRC come to tax ABC they do not have take the net position as they could argue (and they will) that the business of contracting and business of trading are so dissimilar that the tax is considered separately. quite simply because tax law depends on the nature of the business
this is why many many businesses will have separate legal entities GE capital, GE property, GE aviation, GE medical etc etc
again, take it up with an accountant. the legalities of trading as two are easy, as companies house wont check your mem and arts. HMRC on the other hand will check.
if you fail to prepare the accounts correctly, you personally will be fined and it won't matter about the company at all, thats known as lifting the veil of incorporation
hope this helps
ok so we still do not agree
if you are a sole trader and you earn income from employment, for example, but also do bonafide self employed work on the side, any losses that you earn as self employed can be rolled back or forward against ANY income earned regardless if that is employment income or self employment income. You can net off your taxes as an individual as long as it is not itemized differently, such as dividends or capital gains.
now in the case of corporations, in real terms, there are nearly 3 million small to micro companies in the UK which are incorporated electronically that use model articles of association and memorandum which is, in laymans terms, a universal template. To "lift the veil" based on vague template documents is hard for me to see. Furthermore, lifting the veil has to do with when you use a company shell to hide and mask liabilities or something of that nature or when a situation arises where the shareholder can not be protected by the ring-fenced company. Lifting the veil has little to do with netting of income streams for the beneficial shareholders of a company. Companies like GE setup subsidiaries for many reasons, such as ring-fencing assets for risk management and cash management purposes, not just for tax interpretation. So if GE "a" has to default on debt for example, the creditors do not have access to funds available at GE "b." additionally, if GE a has a different equity split than GE b, then that is another reason to ring-fence.
if you take a company who started selling clothes but all of a sudden wanted to offer advisory services by setting up a new revenue department within the same company with capex, you are telling me that they are not allowed to offset losses through growth expansion bc they are forced by tax law to do it through another entity or they are not allowed to net their revenue streams? So goldman sachs foreign exchange desk is a materially different business from mergers and acquistions so what would happen in this case?
Unfortunately, what you are saying does not make sense to me, can you point me to something in the rulebook or some kind of tax evidence anywhere to sway my opinion on this if i am wrong?
http://blog.thecompanywarehouse.co.uk/2010/02/18/trading-as-company-and-business-names/
i have seen companies with different revenue streams use diiferent trading names for each business model but pass back their trading to the single entity bc it was all the same same beneficial shareholders, so no reason to ring-fence.
please provide some evidence to back your point
