Tax planning, have I got this right?

JodieRJodieR Experienced MentorRegistered Posts: 1,002
New client has been employed in a higher-rate job for past 20 years and has now quit to start up a business.
His business plan predicts that by Mar 2013 his accounts will show that he's broken even and then he hopes to start making a profit in the following year.
He's looking to invest about £20k in a van and equipment for the business.

If he trades as a Ltd CO from the beginning it'll be a long time before he gets relief for the £20k investment.

If he trades as a sole trader to start with and then incorporates in April or May next year am I right in thinking he can claim AIA on the van & equipment (and set the loss against a previous year's employment income to get an £8k tax refund) and then he can make an election on incorporation to transfer the assets to the company at their written down value (ie nil, or maybe £1 if need be)?

Comments

  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069
    Sounds fine to me, apart from the bit where I'm not quite awake and this is my first day back after 10 days off work :lol:

    But yeah - losses in the first year = carryback relief. Thus losses in first year = sole trade not Ltd, unless there are other overriding reasons for being Ltd from the off.
  • JodieRJodieR Experienced Mentor Registered Posts: 1,002
    Monsoon wrote: »
    unless there are other overriding reasons for being Ltd from the off.

    Well this is the issue, if he's investing that much in a new van & getting fancy leaflets etc printed it's going to be a bit of a hassle waiting 6 months before incorporating. But £8k is a lot of money!
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