Can I claim expenses before my company was formed?

When starting a business you may have incurred pre-trading expenses that you paid for using your own money. If the expenses were solely for use within your new business then yes, in most cases you may claim for the expenses when your new business starts trading.

When you record your pre-trading expenses in inniAccounts software, you’ll need to set the date of the expense as the incorporation date of your company. This is because all your transactions must be within an accounting period, i.e. between your incorporation date and your company financial year end. We recommend that in the description you enter the actual date the expense was incurred along with a description of the expense.

Typical expenses that you may incur before your company was incorporated could include:

  • Purchase of equipment, i.e. laptop
  • Insurances
  • Advertising
  • Domain names & hosting
  • Stationery
  • Professional advice
  • Phone calls
  • Travel costs (including mileage allowances)

Claiming for the cost of training courses prior to trading however is not allowable.

There are a few points that you’ll need to be mindful of. Firstly, for corporation tax purposes you’re officially allowed to reclaim expenses from the last seven years before trading. For VAT purposes however, it’s just six months. With all cases regarding expenses it’s best to take a pragmatic view.

With this in mind, we recommend that you only claim for items in the six months preceding the launch of your new business. When claiming these expenses you need to be confident that you’ve purchased the items specifically and wholly for your new business. For example, you shouldn’t claim for equipment you have purchased originally for hobby purposes which you’ve then later decided use in your business. As always, make sure you keep good records of your expenses, including the receipts.

So in conclusion: yes, you can claim for expenses before your business was formed. Be realistic and honest about what you’re claiming and if the claims are large or complex then do have a chat with your account manager.