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.