Claiming pre-incorporation expenses

This only applies to limited company property portfolios

If you've recently formed a business, there's a strong possibility you paid for some expenses with personal funds before you set your company up. 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 a laptop for personal use and then started using it for your 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.

Purchases of goods and services

In many cases you can claim for the purchase costs of expenses up to 7 years before the date you founded your company. 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.

When a business is letting property, the business begins trading when the first property is rented out. At which point, expenses incurred can be deducted. This also means you can now claim 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 the Provestor software and date them on the day your business was formed. You can enter a description stating these are pre-incorporation expenses.

As part of your record-keeping, we also recommend attaching a copy of your receipt to the transaction in the software.

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