Business start up costs (pre-trading expenditure)

richiebkerry

Can anybody confirm the timescale allowed for costs to be backdated and classed as pre-trading expenditure? My wife plans to start up her business as a childminder in April 2011, but associated costs have already occurred from many months beforehand.

I've found the below information from HMRC but they don't mention any time period....

"Where the qualifying trade was set up and commenced on or after 6 April 1995 the qualifying pre-trading expenditure should be treated as incurred on the day on which the trade, profession or vocation is first carried on. It therefore enters into the calculations of the profit or loss for the first year of assessment in which the trade profession or vocation is first carried on. No separate claim for loss relief is required."

http://www.hmrc.gov.uk/manuals/bimmanual/BIM46355.htm

Kind Regards

Richard

T.C.

Yes, if the costs are solely business related, ie purchased equipment or toys for the children before the day the business started, they are allowable.

Tracy_Rutherford

Hi Richard,
You are allowed to put through expediture incurred 7 years before business commenced.
The expediture assumely would have been paid privatly as there was no bank account set up. The money can be taken out once trade commences.

Tracy

richiebkerry

Thanks for your help TC and Tracy.. that has helped me out greatly. The amount we have spent so far is a small fortune! Best start digging for receipts. I think the trick with my wife’s business is to keep it as simple as possible.

Ronnie

Toys, etc bought specifically for the business as mentioned previously. Presumably, so long as you can prove they are start up costs over a period of time, ie telephone, fuel, stationery, then these would be a pre-startup expense.

My understanding for goods introduced to the business is that you have to value them at market price on the day they are introduced to the business, not at the original purchase value. If used 50% business use, 50% personal use, ie computer, car, then 50% of estimated market value would be business capital asset.

If registering for VAT, you can claim back VAT paid for up to four years for assets held in the business on the date of registration, and can claim back VAT for services up to six months prior to registration (ie solicitor's fees).

Kinga1989

Ronnie wrote: »

Toys, etc bought specifically for the business as mentioned previously. Presumably, so long as you can prove they are start up costs over a period of time, ie telephone, fuel, stationery, then these would be a pre-startup expense.

My understanding for goods introduced to the business is that you have to value them at market price on the day they are introduced to the business, not at the original purchase value. If used 50% business use, 50% personal use, ie computer, car, then 50% of estimated market value would be business capital asset.

If registering for VAT, you can claim back VAT paid for up to four years for assets held in the business on the date of registration, and can claim back VAT for services up to six months prior to registration (ie solicitor's fees).

thats right but u can only claim the vat back on the assets, purchases that are still in the business