Clean It Up
UK Floor Cleaning Forum => Carpet Cleaning Forum => Topic started by: Eddie_Rhone on August 05, 2011, 08:54:53 pm
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Had my annual meeting with my accountant today, he has suggested that I become a Ltd Co the last couple of years and said It again today. His arguments
about saving tax are very good but I'm not sure had a plumber friend who changed to a ltd company and goes on about it been the worst thing he ever did. So what is the experience of people on here is changing to a ltd co good or bad.
Eddie
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its relevant to what you have and earn and dont want to loose if it all goes bandy!!!
but it will also give him the chance to up his charges Massively so be careful
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It depends entirely on the status of your business as well as your personal status. No one other than a good creative accountant that knows the relevant circumstances can advise you.
If your plumber friend is so perturbed about his situation there is nothing to stop him changing back to sole trading
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ive been advised to go ltd too, will be having a chat with my accountant in the next week or so to discuss it.
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Must be something in the air....we been advised to go LTD as well....can't make our mind up ???
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ive been limited for the last 15 years worth every penny
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Yep, I went ltd in 2002. best thing I ever did.
The simple thing is that you're t/o and more particularly your profit puts you in a position whereby the exta accountancy charges you will pay are far exceeded by the tax you save. Your accountant wouldn't recommend it unless the figures stacked up.
Apart from that it also gives you some protection in case the wheels came off your business-protecting your personal assets from the company's creditors (excluding any guarantee you may need to give to your bankers if you are borrowing from them. (Email me if you want further info on this.))
Some say it also makes you look more "professional" and/or a bigger organisation and therefore more creditable in the eyes of clients.
On much of your paperwork you won't even have to mention that you are limited if you still prefer to give the image of being small and personal.
Rog
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Been Limited for a few years now,
The only downside is the additional accountants fees as they need to supply a set of audited accounts for submission to Companies House each year, our accountants fee is £395 for the year against £195 for sole trader accounts.
On the plus side, you pay less tax as you take a basic wage (£7,200pa) and then a company dividend which incurs 20% tax as opposed to drawings which incur 23% tax. Plus if it all goes tits up, your house and savings are safe.
I would disagree with Rogers comment though, you do need to declare your limited status on all paperwork as this may affect a clients perception of you and how they treat your credit rating, you cannot hide behind ltd status if it is not on your paperwork.
I have just taken an individual sole trader to court when they defaulted on a payment, none of their paperwork said they were ltd, but they were and they tried to hide behind it. The court ruled in my favour as they had not been open about their ltd status, she now has a CCJ against her as an individual..... so her credit rating is now basically f..ked!!
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You'll have to give me the name of your accountant Ian - I paid nearly £600 last year for sole trader accounts !
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We went the other way from Limited to a Partnership. As well as paying tax on your dividends you also pay corporation tax on your total profit before you take your dividends out. You also have to run a PAYE scheme as you would no longer just be a sole trader but a director who is an employee of the limited company.
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You'll have to give me the name of your accountant Ian - I paid nearly £600 last year for sole trader accounts !
Jeez mate.
Keep really good records of your ins and outs and just fill in a self assessment form online yourself. Costs £0
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You'll have to give me the name of your accountant Ian - I paid nearly £600 last year for sole trader accounts !
£600!! thats alot of bones Steve!
I pay £249 a year. Including VAT
Just seen Warrens reply. Yeah keep records of your in's and out. Keep all recipts etc And then catagories everything, monlthy income and outgoings. Takes a few minutes a week to keep on top of this.
Making it easier/quicker (cheaper) for the accountant to fill in your tax return for you.
I would recommend you get an accountant to do the tax return for you though!
Tony
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To put that price into perspective - I run a day book which is reconciled monthly against bank statements,
I present a fully itemised and reconciled purchase ledger and all receipts are filed in date order in a monthly folder.
My accountant is actually a client of mine - I have carpeted his house from top to bottom and also his kids houses - perhaps he's trying to claw some of that back.
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With Warren on that.
Claim for everything to do with your business
and do your own incoming and outgoings.
You have to do it for the accountant anyway so
all you have to do then is do the online tax return
which is a doddle to do now anyway.
If in doubt about whether you can claim for something
or other queries just ring the tax office, they are
quite helpful.
It is not rocket science if your a sole trader so why
pay others.
John
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We thought we claimed for everything we could, my wife is an accounts technician and records everything, however, we gave it all to our accountant and he proceeded to save us a further £8,400 on our last years tax bill.
You may think you are saving money be doing your tax returns yourselves, however in reality you are probably costing yourself more than your saving.
The thing to do is take your last years self assessment and a copy of your accounts to an accountant, ask him to look over them and see if he/she could have saved you anything on what you paid. If they can save you more than they cost you, then it's worthwhile.
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totally agree with ian, i had a very big profit this year and still not paying tax thanx to my accountant, and all above board before you ask, woop woop. ;D
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Derek,
Did you just say 'woop woop'?
Any respect I had for you is now gone.
I'm afraid you're dead to me now.
Ash
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Derek,
How is it possible to make a large profit & not pay any tax ?
Regards
Steve
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probably because he has offset his expensive truckmount costs
Then he probably had a big write down of stock when he went out of Market Trading .
and became a Carpet Cleaner
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I thinkits more likely he has mis-worded what he was saying, you pay tax on your profits...... more profit- more tax unless I'm missing something.
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ash i erm said, i said erm erm What what, it was a typo. ahem, anyway, back to the thread.
steve/mike
yes you are missing something.
a bloomin accountant, ;D ;D ;D
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My Ltd Co has paid no tax for the last 2 yrs.
I've had 5 holidays, a new car and my wife has new T*ts....... AND YOU SAY I DON'T HAVE AN ACCOIUNTANT....... i HAVE A BRILLIANT ACOUNTANT!!!!
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;D ;D ;D
like it.
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I know how to claim & not pay much tax, but surely if you claim too much and your accounts don't show much profit you could be shooting yourself in the foot if you need a loan or mortgage etc
That's what I've been led to believe unless I'm missing something ?
Steve
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totally agree with ian, i had a very big profit this year and still not paying tax thanx to my accountant, and all above board before you ask, woop woop. ;D
Start saving the pennies for the next tax year. You'll get hamered.
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not according to my accountant, hence the discussion to go ltd. there are ways to get alot of it back.
again, a good accountant are worth there fee, i pay £400 a year. will be more if i go ltd but still well worth it. all those that do it there self will insist they can do just a good a job, all i can say is try an accountant for 1 year. you'll be amazed the difference between a rug doctor and a professional carpet cleaner.
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i have a sole trader partnership and am paying £550 plus vat per year, this seems expensive now?
???
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I have experience of both sole trader and ltd, I am a shareholder in a few ltd companies, x company director and a sole trader in 3 other ventures, ltd is safe as debts and tax liabilities are the companys and not yours personally, unless a personal guarantee has been signed.
If you dont pay tax then you are not making any profit, this is a fact!
Be very careful though as if you are investigated HM rev will look into all your finances and you will have to prove where the money is coming from to pay for your lifestyle.
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As long as you keep your accounts quite straight your accountants bill whether ltd or sole trader is mainly based on turnover. Ltd accountancy fees are IMO about 20% higher than sole trader. Any one paying just a few hundred quid a year for ltd or sole trader has a very cheap accountant or has a very small turnover.
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totally agree with ian, i had a very big profit this year and still not paying tax thanx to my accountant, and all above board before you ask, woop woop. ;D
My two posts have had plenty of views but no replys :D
I'm confused Derek, a big profit???? how do you pay for your mortgage, food, car and utility bills then, if your not paying any tax then your not earning any £'s.
So you cant have made any profit.
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It is all very confusing
I thought if you were a Ltd Company and the company supplies you with a car your tax code is adjusted which means you have to pay more tax through PAYE
If you make no profit you cannot pay a dividend so the potential tax saving is not worth having
IF you can find a lease company that supplies equipment vans cars to newly formed or short life Ltd companies without a directors guarantee that could be a benefit if you do go down tube and enables you to buy new vans and all the latest equipment to boast turnover ie rug plant, hard floor equipment waterfed poles hire extra staff etc without personal worry as if company did go down tube you buy it back as a sole trader orr form another company if you are not sent to prison
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professional cleaners/restorers sloshing out over ltd/sole/taxes etc !
:-X
titter titter ;D ;D
off to Alton Towers on a marketing exercise ( all claimable I think ??? )
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Ricky..... but that's the point!! a marketing exercise at Alton towers including the accommodation the night before would be a legitimate business expense.
for the last 6 years I have attended the connection cleaning show in las Vegas, My wife & i are there again in 4 week, the full trip is claimed as a legitimate business expense we don't skimp on any part of it and it cost a small fortune but My accountant (who is very..very strict) never bats an eyelid about it as he knows the purpose of the trip is business.
my son has started working part time for our company he takes out our other guy and they both deliver leaflets ..... he gets paid but more important he has to drive our car to get to the area. As he is only 17 this made the insurance premium go through the roof but we had no choice he needs to drive the car so this is a genuine business expense
I could give some other example how genuine business expenses can enhance my families life
I'm in a favourable position as my wife earns a good income so has the disposable income to run our household so our company can runs at a very low profit,
i think some people need to have a good relationship with their accountant and just ask them for advice on how to spend their money
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Anyone who is unsure about the benefits of operating as a Ltd company should read Mike Halliday's post and read it again..............
Take note..........you MUST find an accountant you can chat to and who will offer you BEST ADVICE but it's up to you to ask the right questions.
If you wish to be included in local authority / health board / etc tendering it's advantageous to be Ltd. They wont tell you this but it's the case.
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Don't understand what Mikes post has to do with being limited. Business expenses are business expenses regardless of the business status.
If you are making money you pay tax. You can reduce the tax you pay by various legal expenses. However you still have to have money left to live and invest so that money is taxable.
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Im not convinced you can do what Mike says
Yes you can claim A % of the extra Insurance Policy But you have to proportion the car use
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Don't rely too heavily on an accountant either , if you get investigated by HMRC , you are solely responsible not them, and you won't see them for dust,
I've seen this happen on a few occasions, accountants take no responsibility for what they advise you, your stop expected to make good judgement, and the inland revenue are no fools, they know what you need to live on !
Steve
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All your customers will be paying an extra 20% and your residential customers can't claim vat back.
Until you reach the threshold, in the current climate, raising your prices by 20% might not be a good move.
Paul
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Kinder, you're confusing becoming a ltd company with being VAT registered. You can still be a ltd company without being VAT registered (until turnover reaches £75k iirc)
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Yes I am, :) I always thought you had to be VAT registered to be a LTD company.
I've leart something today.
Paul
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When you setup a ltd company you are creating a legal entity, of which you become employees (usually as a director). This means you get paid a salary, via PAYE, but of course the company is still liable for its share of your NI contributions - but you get a certain allowance tax-free (as determined by your tax code). If the company gives you a company car, it can claim deprexiation or relief of lease payments (depending on how its funded), but your tax code will change to reflect the benefit in kind allowance. The only time you don't pay this is if its a pool car exclusively for work use (ie royal mail vans) and not travelling to & from home etc.
With the ltd company being a seperate entity, you can't be held liable for its losses anymore than if you were working for a national ltd company (as long as you act in accordance with the law!), so if the company goes belly up, you keep your house, unless you've given a directors guarantee (which will normally be required for the 1st 3yrs of trading).
The VAT aspect is another kettle of fish altogether :)
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The only disadvantage to becoming a limited company for us was when we went to change our vans.
Because we were still in our first year we had no accounts meaning I had to take out the finance personally.
A similar situation we have is we cant join the Contract Flooring Association for another year until we have 3 years of accounts as a Ltd Co.
Other than the above moving to a Ltd company has benefitted our business massively.
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As Ian G has said you can only pay dividends if the ltd company is making a profit.
Some total c##p is spoken on here. If you make a profit in any business you pay tax on those profits.
Its also true that your accountant wont be liable for any wrong doings, its down to you. With accontants, from my own experience the cheaper ones are best avoided, its like anything in life, you only get what you pay for.
Cash is king as it always has been and always will be, but its very wise to have other legitimate income that you have paid your taxes on to pay the bills. If not its only a matter of time before it comes back and bites you on the a##e.
A friends, friend had a business not turning over enough to be vat registered, he had a £90k car, his wife had a £50k car they lived in a £600k house, nice holidays twice a year, private schools for the two kids, all paid for from a company making just £15k profit pa :) in the end he lost everything including his wife.
Mike, of course certain things can be paid for by your ltd company just as they can with sole trader or a partnership, but general everyday living expenses cant. If you dont have a wife who has a good income to pay the bills, how can you live?
Ltd is safer especially if you employ staff, but remember all assets are the companys and not yours, so that shiney new van and truckmount will be sold for peanuts at auction if the business fails.
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Happy, you must have missed this part of my last post
.....'I'm in a favourable position as my wife earns a good income so has the disposable income to run our household so our company can run at a very low profit'.....
John my post about how I spend company money was in response to the post prior from Ricky who mentioned Alton Towers..... although not relevant to the original starting post like most topics this had gone off topic into profit & spending,
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Mike, I totally understand how it works, my businesses have paid for many a nice thing tax free.
I understand how you choose to run your business, your wife is earning a wage paying tax and paying the bills.
My point is....
As far as I am aware If you make a profit in any business you pay tax on that profit, I would like an explanation off Dereck of how you can make a profit in a business and pay no tax ???
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Perhaps an explanation might be the difference between gross profit, and nett profit?
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Gross profit is total profit and net profit is after deduction of tax and deppreciation, you make a profit and you pay tax :)
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Exactly my point..
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thought a clever guy like you paul would of worked it out. heres a clue, i made a massive profit (well, wouldn't say massive by your standards ;D) i'll rephrase that, i made a humble profit "THIS YEAR". can you guess what it is yet?
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My standards :-\
Why would I want to guess ??? my point was if you make a profit you pay tax, end of.....
you stated you havent paid any tax and made a profit, I would like to know how this is done
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Guess what Derek is trying to allure to is that if he had said "LAST YEAR" it would have meant his profit was less than the 'personal tax allowance' threshold. (Humble indeed). As for "THIS YEAR" - well there ain't any take due yet :-\
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thought a clever guy like you paul would of worked it out. heres a clue, i made a massive profit (well, wouldn't say massive by your standards ;D) i'll rephrase that, i made a humble profit "THIS YEAR". can you guess what it is yet?
Ok Derek, I cant wait any longer. I'll have a guess you made £20 and there is some clause saying if you made less than £25 profit you dont have to pay any tax ;D
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;D
just for you paul, seeing as the suspence is killing you.
if i made aloss in my first year, small profit in my second year, and made a humble profit in my third year, would that help you work out how i made a profit THIS YEAR but manged to avoid paying tax. its next year i'm worried about as my business is growing at a predictable rate and can see why my accountant is advising me to go ltd. but at the moment i'm not to up on what ltd is all about so need to get some good advice elsewhere befiore committing.
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If your in your fourth year of business in the service industry and only just making a profit I would be worrying :)
And no, if you made a small profit in your second year some tax should have been due.
Your not to up on what ltd is ??? you said your accountant had advised for you to go ltd, no b####y wonder if youve never paid any tax, so go ltd ::) But the tax you may owe as a sole trader will always be your own debt and cant be passed on to the new ltd co.
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If your in your fourth year of business in the service industry and only just making a profit I would be worrying :)
And no, if you made a small profit in your second year some tax should have been due.
Your not to up on what ltd is ??? you said your accountant had advised for you to go ltd, no b####y wonder if youve never paid any tax, so go ltd ::) But the tax you may owe as a sole trader will always be your own debt and cant be passed on to the new ltd co.
you can earn £6500 before you pay any tax, or am i missing something.
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Its upto £7475 a year now Derek.
Andrew
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wow £6500 ;D and how does that pay the bills ???
oh thats ok then its gone to £7475
is this some sort of a wind up >:(
You are going off topic, you make a profit and you pay tax, end of.
If you get investigated and cant prove your legitimate earnings that have paid for your lifestyle then you are in the s##t. Unless you live in a tent in the middle of a field £7.5k will not be enough ;)
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I know quite a few who have a ltd co, they get the tax limit 7.5k, so does their wives. total 15k + child tax credits, working families tax credits + child benefit comes to a fair liveable wage.
They dont have to pay for vehicles, fuel insurance and anything else they can get away with, they claim this every other year and alternate years they take their dividends and no benefits etc. They also have no mortgage.
A good lifestyle, its just how you work the system leagally, however its not for me, dont like claiming benefits.
Andrew
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;D
just for you paul, seeing as the suspence is killing you.
if i made aloss in my first year, small profit in my second year, and made a humble profit in my third year, would that help you work out how i made a profit THIS YEAR but manged to avoid paying tax. its next year i'm worried about as my business is growing at a predictable rate and can see why my accountant is advising me to go ltd. but at the moment i'm not to up on what ltd is all about so need to get some good advice elsewhere befiore committing.
I know what Derek is on about, but I can't explain it as I would be here all day! and anyway that is why we employ an accountant.
It doesn't apply to our cc business anymore, but does apply to another we have. (newer, only in it's fourth year!)
If your first year accounts show a loss, this loss can be rolled over in to the next year accounts, starting you with a negative figure. IF the loss were big enough it could wipe out any profit made over the next couple of years, as in those years you will have outlays too.
Our Accountant does the accounts in what I call a normal way and he also does a report on what the business is worth if we were to sell, this is then calculated in some way taking into account losses, outlays and incomes and we pay no tax against this newer business. It won't last forever, but as long as we make a major purchase/investment in this business in the first few running years, we will pay little or no tax against it at all. That's why we have an accountant who really does know what he is doing :)
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I'm happy to wait for your detailed reply Helen :)
Some points to note though, before you waste your day:
If you make a profit you pay tax (eventually, as sole trader like Derek) Ltd is another ball game and your amazing accountant should advise on this ;D
If you get investigated and cant prove how you pay for your lifestyle, then you are in the s##t
Ltd debts and tax liabilites are the companys not yours (apart from any personal guarantees) (see point one above)
Tax allowance has only just risen to the figures mentioned, is it enough for me, no not even with 4 of them!
I also have an accountc##t.... sorry accountant that alledgedly knows what he is doing ;D
My current one and past one/s have given good advice over the years and saved me alot of money. But I have always, always had a tax bill when a profit was made.
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Helen does make a valid point re: rolling over a loss.
I'm 99% certain that you can roll over any losses for 3 years to offset any profits, although I should imagine that this would be lost in the transition from sole trader to ltd company.
So with all the expenses of setting up, it's not unfathomable to make such a huge loss (by incurring big costs) in the 1st year as to offset any profits in the following 1yr at least.
Ash
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Helen does make a valid point re: rolling over a loss.
I'm 99% certain that you can roll over any losses for 3 years to offset any profits, although I should imagine that this would be lost in the transition from sole trader to ltd company.
So with all the expenses of setting up, it's not unfathomable to make such a huge loss (by incurring big costs) in the 1st year as to offset any profits in the following 1yr at least.
Ash
I am not doubting you can Ash, you are missing the point of my reply and why I seem to have got involved in this now very boring thread is beyond me.
Profit = tax liability, whether its paid or not is irrelevant to the thread.
Its really simple, if losses are rolled over from a prevoius years accounts and the figures say so you havent made a profit.
If a profit has been made, you will be liable for tax on that profit.