Quote Originally Posted by Ceri View Post
My company has 2 years from when it starts actively trading (making sales and not just purchasing tools, consumables and setting up infrastructure) to become profitable otherwise it would be deemed a hobby and not a business. I am not sure whether or not the same rules apply as a sole trader but I would imagine so otherwise people could offset their losses against their hobbies indefinitely and completely negate their tax obligations.
Ceri,

2 years to become profitable or you will be regarded as a hobby? Are you sure this is correct? It doesn’t sound right at all but I am always prepared to be corrected (educated!). I did a lot of research into running a limited company because I ran another business as a Limited Company many years ago and I know many rules have changed.

However, I don’t recall ever reading anywhere that a limited company must be profitable. There are certain conditions in regard to remaining solvent, but that is completely different to being profitable.

A limited company is regarded as separate legal entity, almost like it is a separate person, so I am fairly certain you cannot use any losses from the company to offset taxes on your personal income. Just like one person cannot offset their losses against another person’s income. They are two completely separate legal entities.

Like I said earlier, I always like to be corrected when I am mistaken.