Even as a sole trader you are entitled to set a years losses against the tax paid in the previous three years and claim a refund. If you havent paid tax in the previous three years you can carry forward the loss against future profits. It is also possible to offset Sch.D losses ( self-employment ) against earnings from normal employment.gambogaz1 wrote:Tax is due year on year if your classed as a sole trader, once your tax is assessed for a complete year it doesn't matter what happens the next.
Of course if your set-up as a company then losses can be offset against previous years profits (not sure if it's still max of 3 years) or rolled forward to the next year.
But anyway in this case your not set up in any form, it's just the tax man stating your earnings are taxable, they'd do like a schedule of your living costs (Rent/Mortgage, bills e,t,c) then work out a figure they reckon you must be earning to cover said outgoings and that would be your assessed earnings, however they also use other industry figures as a guide to, like say you where a hairdressers fiddling the books they'd look at other hairdressers assessments as a guide to help them, but for gambling they'd have no back up.
The big problems for the tax man would be confirming how much a fruit player had made as people have such varying abilities and levels of info and all income is in cash so they would pretty much have to just accept the tax return submitted. They would also have a problem with people in regular jobs claiming they were part time players but regularly made losses and therefore claiming a refund against their normal job.
They would have to allow any expenses incurred wholly and necessarily in the pursuit of your business. Obviously buying a drink for example is necessary in most pubs as are your travel costs so a night on the beer and a taxi home could be construed as an allowable tax deduction as would be a night in the pub not playing as you could be watching random punters playing in an effort to work something out for yourself and further the future profits of your 'business'.
Imagine the cost of that to the treasury ! Ultimately if they could accurately tax all profits from fruit machines but had to allow all losses against tax they would lose as machines obviously pay out considerably less than they take and you would also be claiming certain costs as deductible! They would also have to spend money administrating this loss making system.
