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Trading?

RachelRachel Trusted RegularPosts: 349FMAAT, AAT Licensed Accountant
in General accounting discussion
I have a client who has a dormant company. He is a software developer and has started to incur charges for such. So I have produced his accounts for companies House showing a loss etc. My problem is doing a CT return, I am having difficulty getting his URN from HMCE or in other words he is. He has spoken to HMCE and they have told him that they will keep him in dormant status until May 2011 as he isn't trading. He has made a loss in the region of £20k so surely he needs to file a return.

My understanding is that any activity is trading. Am I wrong?

Thanks for reading
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  • slickslick Settling In Nicely Posts: 15Registered
    Rachel wrote: »
    I have a client who has a dormant company. He is a software developer and has started to incur charges for such. So I have produced his accounts for companies House showing a loss etc. My problem is doing a CT return, I am having difficulty getting his URN from HMCE or in other words he is. He has spoken to HMCE and they have told him that they will keep him in dormant status until May 2011 as he isn't trading. He has made a loss in the region of £20k so surely he needs to file a return.

    My understanding is that any activity is trading. Am I wrong?

    Thanks for reading
    Hi Rachel,
    Is your client intending to trade in the near future to recover costs already incurred? If so, and depending on whether the costs are of Revenue or capital nature he may be able to treat the costs as pre-trading expenditure and complete a corporation tax return for the relevent accounting period to establish any losses for tax relief. Otherwise, I would think there's no requirement to complete a Return as not commercially trading and no tax relief available for expenditure incurred! Trading will start once the company sells or markets the product at which point the Revenue should be informed re change of circumstances. Hope this helps.
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  • RachelRachel Trusted Regular Posts: 349FMAAT, AAT Licensed Accountant
    He should be selling in the next few months to recover his costs, his main spend was to a software developer in the US. Is this allowable as pre trading expenditure?

    Thanks for your response.
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  • slickslick Settling In Nicely Posts: 15Registered
    Yes, so long as the software development and other costs were incurred withing 7 years of start of trading.
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  • RachelRachel Trusted Regular Posts: 349FMAAT, AAT Licensed Accountant
    Super thanks for the info.

    I have been looking on the HMRC website but the search facility seems poor.
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