Claiming pre-incorporation expenses

If you've recently formed a business, there's a strong possibility you paid for some expenses with personal funds before you were fully operational. We'll go through what costs you can claim and how to go about it in this article.

The first thing to remember about any type of company expense is that tax deductible expenses must be used "wholly and exclusively for the purpose of business". HMRC will only let you deduct them from your tax bill if you haven't used them for personal purposes, such as if you bought it for personal use and then started using it for business.

If you have pre-trading expenses, provided conditions are met you can treat them as if they were incurred on the first day of trading and so treat them in addition to other business expenses relating to the first period of trading.

This guide is specific to tax deductions for the purposes of Corporation Tax. For those businesses that are VAT registered, we cover VAT claims in a separate guide.

Purchases of goods and services

In many cases you can claim for the purchase costs of expenses up to seven years from the date you founded your business. Examples include if you bought a domain name, a laptop specifically for the purpose of your business or received professional advice or training.

Take a look at our guide on common business expenses for a more complete list.

Where a business is letting property, the business begins trading when the first property is let. At which point, expenses incurred are part of the rental business and can be deducted. This also means you can claim at that point for legitimate expenses incurred up to 7 years prior.

Receipts and their entry into Provestor

All businesses need to keep records, and you'll need your receipt to claim any pre-incorporation expenses.

Simply add your pre-incorporation expenses to your Expenses area in Provestor and date them as the date your business incorporated. Add to the description that these are expenses incurred prior to incorporation.

As part of your record-keeping, we also recommend attaching a copy of your receipt to Provestor.