Claiming previous old expenses for new business - The Book-keepers Forum (UK)

new start up · Member

Claiming previous old expenses for new business

Shamus · Forum Moderator & Expert

is the business incorportated? Or is this an unincorporated entity?

Do you have receipts for all of the expenditure?

What sort of business is it? (retail/manufacturing/service?)

Are we talking capital or revenue expenditure?

How long after starting the business was it before you registered for VAT?

were the purchases made wholly, necessarily and exclusively for the purpose of the business?

Others may have additional questions.

Shaun.

new start up · Member

Hi Shamus
Will try to answer the best I can

is the business incorportated? Or is this an unincorporated entity?
Not quite sure what this is, but it is to be a limited company and VAT registered

Do you have receipts for all of the expenditure?
Yes

What sort of business is it? (retail/manufacturing/service?)
Hospitality

Are we talking capital or revenue expenditure?
Dont know

How long after starting the business was it before you registered for VAT?
Not started yet and hence not registered for VAT yet

were the purchases made wholly, necessarily and exclusively for the purpose of the business?
The purchases where made for the business only and no other use

Shamus · Forum Moderator & Expert

Sounds as though you need an accountant. Thats not meant as an insult, just trying to ensure that you start off on the right foot as initial mistakes including the day that you set your business up can prove expensive later on if you get it wrong.... And before you think that I am saying that looking for business, I'm not. I personally only take on clients that have at least £100 million turnover. I do this just to help people, not for personal profit.

Incorporation is the act of seperating legal identity of the business from the owner of the business. The resultant entity is a limited company. There are advantages and disadvantages to incorporation which your accounant will be able to guide you through. The same with voluntary VAT registration. Is the amount that you can reclaim worth the 20% extra that you will need to charge?

With your receipts you will be able to reclaim revenue expenditure for up to seven years prior to the start of business. For previously incurred capital expenditure incurred on a first day basis AIA is not available although other reliefs are.

As an example of the difference between Capital and Revenue expenditure, capital is things like computers, revenue is things like printer cartridges. Although not a completely hard and fast definition think of it that capital expenditure is on things that have physical substance that are used by the business. Revenue expenditure is on things consumed by the business. Revenue expenditure might commonly be refered to as expenses but bare in mind that not all revenue expenditure attracts tax relief. For example, client entertainment may be an expense of the business but it remains taxable.

Pre trading expenditure incurred wholly and exclusively for the business up to seven years prior to the start of trading, and for which can be evidenced by receipts. Are introduced to the business as if incurred on the first day of trading.

You cannot account for VAT if you are not registered for VAT. However, once registered you can reclaim VAT on services for up to six months prior to registration and on goods that you still have in the business up to four years prior to registration.... Note, thats prior to VAT registration, not prior to the start of the business.

This is a very high level introduction to let you know that things may not be as straight forwards as they seem without scaring you off trying. Getting an accountant on board now is an investment that will stop you from making costly mistakes down the line.

Hope that helps set you out on the right path. Good luck with your new venture,

kindest regards,

Shaun.

new start up · Member

Shamus wrote:

With your receipts you will be able to reclaim revenue expenditure for up to seven years prior to the start of business. For previously incurred capital expenditure incurred on a first day basis AIA is not available although other reliefs are.

As an example of the difference between Capital and Revenue expenditure, capital is things like computers, revenue is things like printer cartridges. Although not a completely hard and fast definition think of it that capital expenditure is on things that have physical substance that are used by the business. Revenue expenditure is on things consumed by the business. Revenue expenditure might commonly be refered to as expenses but bare in mind that not all revenue expenditure attracts tax relief. For example, client entertainment may be an expense of the business but it remains taxable.

So are you saying that I can not make any pre claims on Capital expenditure what so ever?

Meaning capital expenditure is fixtures and fittings and Revenue expenditure being stock

Shamus · Forum Moderator & Expert

I didn't say that, I said that you couldn't claim Annual Investment Allowance on pre trading capital expenditure

new start up · Member

Shamus wrote:
I didn't say that, I said that you couldn't claim Annual Investment Allowance on pre trading capital expenditure

This makes no sence what so ever!

If I have a PA system or a bar and catering equipment or say a van that I purchased solo for business purpose that I purchased say in the last few year prior to starting the business then can I claim the expences back?

Taxagent · Member

no sense? It makes perfect sense. So what legislation are you looking at to challenge this view?

If you are insisting on doing DIY then you need to do a lot of training and reading up on a wide variety of issues or HMRC (not the IR) will become very very interested in your affairs.

pre trading v. pre incorporation.

You need an Accountant before you (continue to) make expensive mistakes.

-- Edited by Taxagent on Sunday 30th of January 2022 05:33:05 PM

new start up · Member

Taxagent wrote:
no sense? It makes perfect sense. So what legislation are you looking at to challenge this view?

As stated above ; dose that mean I can not claim expences on prior fixtures and fitting?

-- Edited by new start up on Sunday 30th of January 2022 06:01:04 PM

new start up · Member

Taxagent wrote:
If you are insisting on doing DIY then you need to do a lot of training and reading up on a wide variety of issues or HMRC (not the IR) will become very very interested in your affairs.
pre trading v. pre incorporation.
You need an Accountant before you (continue to) make expensive mistakes.

When my mum and dad had the buisness (limited company) my mum did all the books hear self and the accountant would finalise them at the end of the year

Taxagent · Member

Does. Expenses.

You need to run the FULL circumstances by an Accountant. You are mixing up all your Accounting terms. Me answering JUST this one question does not assist your overall picture.

new start up · Member

It sounds a simple question to me!
A limited company claiming expences back for fixture and fitting prio to starting the company

Taxagent · Member

Answered already. You have changed your question. You are now talking about F&F. They are not expenses. You were asking a tax question. Your Mum would have left that aspect to her Accountant. You are asking Accountants to give you free tax advice. You say you do not have a limited company yet, that you have purchased these items before your company has been incorporated.this brings its own issues. Your heading indicates they could have been used in a prior business. Why do you expect anyone to answer with only half the facts, which keep changing. Why do you expect free advice.

You could do a bookkeeping course if you want to do your own books, then your Accountant can sort out any adjustments and mess made at the end of the year, but they are not miracle workers, you still need an Accountant to give you advice before you go ANY further to ensure set up is correct including status and when the best time to VAT register is (generally not immediately for the vague description you have given for your type of business).

new start up · Member

Taxagent wrote:
Answered already. You have changed your question. You are now talking about F&F. They are not expenses.

??????? disbelief

new start up · Member

Taxagent wrote:

You could do a bookkeeping course if you want to do your own books,

Yes good idear but from where?

Shamus · Forum Moderator & Expert

new start up wrote:
Taxagent wrote:

You could do a bookkeeping course if you want to do your own books,
Yes good idear but from where?

The issue there is that you are not asking bookkeeping questions but rather tax and accountancy related questions.

There is a crossover between the two worlds and modern bookkeepers can in many ways be defined as accountants for smaller businesses as well as bookkeepers for larger ones.

To get to where you want to be of having a quite basic knowledge of tax, accounting and bookkeeping could be achieved in about a year. The accounting and tax would be in the later modules but it would be at a basic level where the real knowledge is learnt by reading tax publications once you understand the basics.

Have a read of the syllabuses of training companies such as Premier training for AAT or Training Link for ICB.

When ICB were new I gave them a hard time on here as it seemed that they were giving away practicing certificates to anyone who wanted one and people were setting up businesses within three months of first opening a study book. Those early issues are no longer true. They have matured and are no longer so desperate for market share that they are giving away practicing certificates like confetti.

AAT is the better qualification and if you want to work in accountancy that one is the foot in the door. Accountancy practices regard it as a bookkeeping qualification but it is so much more and would give someone the foundations on which to study higher qualifications such as ACCA, CIMA or ICAEW.

Of course, I'm sure that you don't want to be spending the next ten years of your life trying to gather the information that you thought would be so easy to pick up here so if your intention is to start a business rather than be an accountant then hire an accountant to help you get started. The mistakes that they stop you from making will pay for themselves. Possibly many times over.

If you are worried about their cost remember that most professional practices charge either after the year end when you sign your accounts or on a monthly fixed charge with a year end adjustment so whilst finding (say) £1500 for an accountant may seem like a lot when you are starting out you won't (generally) pay all of that up front... Although for start ups there may be an initial settup charge with some practices due to experience of business owners folding as soon as they realise what running a business actuallly entails.

A good professional accountant in your corner from the get go is so often the difference between a business becoming a success instead of simply no more than another sad statistic.

As your mother had a business, if she was happy with the services of the accountancy practice that she used might it perhaps be a good idea to talk to them about getting help setting up your venture? As a business person you are going to need to get used to delegating work to professionals rather than attempting to do everything yourself.

Starting a business without a financial professional behind you is like buying a car with no tyres on it. It may be cheaper but you are not going to get very far.

Shaun.