Basis - can't decide!

[Daxydoggie]

Hi all,
I'm doing the books for my wife's partnership, and we can't decide on cash v accrual basis, mainly for loss reliefs.
It's a very small retail business this is it's first year, around 2k of stock at end of this tax year, couple of small debtors (£200) and couple of small creditors (£200).
The business will make a loss on cash basis, but on accrual basis would profit by £600, due to stock in hand coming off expenses.
Worried that if we go cash basis that wife won't be able to use her share off loss as flexibly. Suggestions welcome!

Also on losses, can an overall partnership loss be carried or utilised in the partnership AND also the share of same be used in her personal tax return , or would that be counted as being used more than once?

Ive studied all the HMRC information and from other sources on these matters but can't seem to get to the answers I need.

She really can't afford a professional accountant at the moment so trying to help best I can as an ex cost engineer / q.s.

Any advice really appreciated.

Many thanks in advance.
Craig.

 

[Scalloway]

can an overall partnership loss be carried or utilised in the partnership AND also the share of same be used in her personal tax return , or would that be counted as being used more than once?

On the partnership tax return the loss is allocated to the partners. Each partner then uses it against other income as they see fit within the rules.

 

[Mitchells Bristol]

Hello there

Does your wife have any other income, or is the £600 her only income? If the latter - then I would leave on accruals basis as the profit would be within her tax free allowance. If she has income elsewhere, then it is possible that creating a loss initially would give rise to a tax rebate. Ultimately this is just a timing difference, so she may just be deferring a liability.

The partnership itself generates profits / losses which are then split in accordance with the partnership agreement. If the partnership agreement states that your wife takes all of the losses, then she can utilise them as appropriate for her own personal tax position. The partnership does not have a tax position in its own right.

Hope this helps.