Pre-Trading Expenses

At Trueman Brown, we are often asked whether expenses incurred prior to the commencement of trade can be included in that businesses accounts.

The answer is yes, if it can be shown that the expense was specifically for the business.

Generally, qualifying pre-trading expenditure should be treated as incurred on the first day that the business started to trade.

We, at Trueman Brown would recommend that you keep all receipts / invoices for any amounts that you spend in getting our business up and running.

At Trueman Brown we are also asked that if you register for VAT can you reclaim VAT on expenses incurred before registration.

The answer, again, is yes! You can claim for the following:

•for goods: you can reclaim VAT up to three years before you registered for VAT

•for services: you can reclaim VAT up to six months before you registered for VAT

To able to make this claim, the following conditions have to be met:-

•the goods were bought by you as the entity (for example, the individual, business or organisation) that is now registered for VAT

•the goods are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply

•the goods are still held by you or they have been used to make other goods you still hold

For example, prior to registering for VAT the business purchased 10,000 widgets and sold 3,000 of these products. The business can, therefore, claim back VAT on the remaining 7,000 items in stock at time of registering for VAT.

If you require any further information, then please contact us at Trueman Brown http://www.truemanbrown.co.uk/