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Can I reclaim expenses from before I formed my limited company?
Posted Jan 23, 2013
If you have recently set up a limited company, can you reclaim back any of your pre-formation costs?
You can claim back any legitimate pre-trading expenses, according to s.61 of The Corporation Tax Act 2009. These expenses are treated as if they were incurred on the first day the company went live.
In fact, you can reclaim for any costs incurred up to seven years before the incorporation date.
As ever, all expenses must have been incurred 'wholly, exclusively and necessarily' in the course of setting up your contracting business.
Some of the most commonly reclaimed pre-incorporation expenses include professional fees (accountancy and legal), equipment and internet costs.
You may also be able to reclaim the VAT paid on goods and services (assuming your company becomes VAT registered), although the rules are complex.
HMRC manual VIT3200 states that there is a 4 year limit to reclaim for VAT paid on goods, and 6 months for VAT paid on services.
For obvious reasons, you should always keep accurate records of your expenditure before starting up your company, and ask for VAT receipts for any items you buy on behalf of your business.
Interestingly, the actual cost of company formation is a one-off capital cost, and cannot therefore be offset against Corporation Tax. In all likelihood, you (as a company director) will have paid for this personally, and your company therefore reimburse you for this expense.
Always ask your accountant if you have any questions about which expenses you can claim.
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