Time for tea?

I wonder if Taxation readers can help me to navigate my way through some loss claims.

My client (Mr A) is a partner with his wife in a tea room and coffee shop business. The first year's accounts to 31 March 2007 showed a loss of £18 000; these losses were not used by setting off 'backwards' or 'sideways'. The second year's accounts have just been prepared and show a profit of £24 000. Basically the business is run by his wife (Mrs A) with the client having 'underwritten' it and provided the premises.

Mr A also has a property development business in his own name. In the year to 31 March 2008 this made a profit of £35 000 although most of this was represented by rental income from the tea and coffee shop business with some other consultancy income coming in from other property developments...