NIM24615 - Class 4 NICs: computation of liability: losses: example
Kate is completing her Self-Assessment Return. In the period she has:
Year 1:
| Description | Amount |
|---|---|
| Employed earners income, taxed under PAYE and liable to Class 1 NICs | 拢20,000 |
| A profit from her profession of author | 拢5,000 |
| A share of a partnership loss from a trade | 拢10,000 |
Kate elects to set both the Income Tax loss and the Class 4 NICs loss against other income of the year.
She has other income liable to Income Tax in the year of 拢25,000. She can relieve the whole of her loss, 拢10,000.
She has other profits liable to Class 4 NICs of 拢5,000. She can only set off 拢5,000 of her Class 4 NICs loss.
Kate has a Class 4 NICs loss of 拢5000 to carry forward against her share of the Class 4 NICs profits of the partnership.
Year 2:
| Description | Amount |
|---|---|
| Employed earners income, taxed under PAYE and liable to Class 1 NICs | 拢20,000 |
| A profit from her profession of author | 拢5,000 |
| A share of a partnership profit from a trade | 拢1,000 |
Kate has a Class 4 NICs loss from the partnership brought forward from year one. She does not have any Case I/II losses brought forward as all the Case I/II loss relief was used in year 1.
Kate can set 拢1,000 of her Class 4 NICs loss off against her share of the partnership profit. The balance of 拢4,000 is carried forward against later years.
Kate cannot set the 拢4,000 Class 4 NICs loss against the 拢5,000 profit from her profession. This is because a Class 4 NICs loss can only be carried forward against a loss of the same trade. SSCBA92/SCH2/PARA3 states that 鈥渞elief shall be available under, and in the manner provided by鈥� the provisions in the Taxes Acts.