Preparing to trade

27th May 2016

Start-ups: Maximise tax relief on pre-trading expenses.
When starting out in business, it is possible that you will incur significant costs before you start trading. Some common expenses that fall into this category are advertising, insurance, rent & rates, stationery, machinery leasing and website hosting. The good news is that such expenses incurred no more than 7 years prior to the commencement of trading can be treated as if they were incurred on the first day of trading, and therefore attract tax relief, subject to meeting the usual conditions of tax deductibility.

Where business assets are bought in advance of trading, Capital Allowances can normally be claimed. You may also own assets personally that you wish to transfer into the business; this can be done using the market value on the day trading commences. There are some pre trading expenses which cannot be claimed, for example training courses (which can only be claimed once trading has commenced), and, strangely, company formation costs.  It may also be possible to recover input VAT incurred if and when the business registers for VAT, subject to rules discussed previously:

As always, you should ensure that you keep full details of any expenses incurred, including invoices.

Blog entry by: Scott Bishop.

Disclaimer - All information in this post was correct at time of writing.
Other Blogs
Byron Roberts
26th March 2024 Making Tax Digital for Income Tax coming soon

Making Tax Digital for Income Tax will soon be upon us.   Over the past few years’ rents have been increasing and will continue to increase as inflation remains high. Many landlords will now be affected or will be coming close to the qualifying limits. With April 2026 fast approaching for those with qualifying income…

Amanda Newman
25th March 2024 Finance available for start ups

Did you know that there is finance available for start ups?   Starting in business can be an expensive task and a lot of businesses are not always aware of the funding that is available from the government to help with this.   Where to start The most popular is the government backed start up…

Harriet Sim
25th March 2024 The end of Furnished Holiday Lettings

The recent Budget announcements will bring an end to the tax advantages afforded to the owners of Furnished Holiday Lettings (FHL) and set them apart from the owners of normal residential properties.   At present, qualifying FHL’s provide a number of tax advantages: Unrestricted tax relief for mortgage interest Entitlement to claim capital allowances, including…

Megan Turner
22nd March 2024 Directors’ Responsibilities

What are directors’ responsibilities? As a director, you are legally responsible for running the company. This must be done in line with both the articles of association and Companies Act 2006.   A key role is to ensure that all statutory reporting requirements are met. This includes, but is not limited to: Filing the annual…

Louise Bassett
21st March 2024 Don’t Delay: Farming Equipment and Technology Fund Deadlines

Earlier this week, DEFRA added the closing dates for the Farming Equipment and Technology Fund (FETF).   If you’re a farmer, horticulturist, forestry owner or contractor to the any of the aforementioned, and you’re looking to improve productivity, manage slurry or improve animal health and welfare through the use of new technology and equipment, don’t…

Shamus Chaplin
21st March 2024 Removal of Multiple Dwellings Relief for SDLT

On 6th March 2024, the abolition of the Stamp Duty Land Tax (SDLT) relief known as Multiple Dwellings Relief (MDR) was announced. The Reasoning HMRC’s tax reliefs evaluation programme has determined that MDR has not satisfied its original objectives. They have concluded that there have been numerous cases where the relief has been abused and…