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Pre Trade Expenses

8 August 2013 No Comment

I’ve only just registered my business, can I claim pre trade expenses which I paid personally?

The basic principal is that “if you paid for something in the knowledge that you were starting a business, and the prime motive for buying this something was to enhance that business, then it is a business expense” and (subject to a three year time limit) you can claim for it. That applies to both goods and services, and in order to claim the full cost you must satisfy both parts of this test, that (a) there was a business prime motive and (b) the purchase was within the three years preceding day one of the business.


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 Alternatively, if (for example) you bought your desktop computer and printer four years ago, and you introduced them into the business on day one, then you can claim their “fair market value” on day one as an allowable expense. This applies to goods only. If you cannot claim them under the three year rule mentioned at paragraph one, then claim them under the fair market value rule, and use eBay or GumTree to work out what a fair market value for your something is. You can also claim for (for example) a CamCorder which you bought for the family two years ago, but then introduced into the business – it may fail the “business prime motive” test at the date of purchase, but it could still qualify under the “fair market value” rule as long as it is now a business asset and not a family asset!

In either case, you need to submit a claim form to your business (yes, even if that’s only you) and have the precise amount reimbursed from the business account to your personal account.

If you’re thinking of introducing your car into your new limited company, you probably shouldn’t. The costs of tax and national insurance, on the benefit in kind of having a company car, usually mean that it’s actually more cost effective to run the car personally and claim a business mileage allowance from your company.

Before doing the claim form, any VAT registered businesses should also consider reclaiming old VAT.

Mileage Claim Form

Non-VAT Expenses Form

VAT Expenses Form

When you’re ready, prepare one or more of these claim forms, the full process is here, and add them to DropBox. Let your accountant know when you’ve done that.

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