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Expert answers: How do I claim for pre-startup incorporation expenses?

Readers question: I bought some goods which I intended to sell via my company before I actually incorporated. These goods were not bought under the company name but instead under my name. Can I still add this to my accounting tool as the cost of goods?

pre-startup incorporation expenses

Experts answer: The expert answering this question on Pre-Startup incorporation expenses is Sophie Tyler from Dolan Accountancy.

Legitimate business expenses

Expenses incurred before the incorporation date of your company can still be claimed as an expense, provided you can show these were legitimate business expenses.

They would need to be for the purposes of your company trade and incurred no longer than 7 years prior to the claim. They can be claimed as a deduction against the company Corporation Tax bill unless they are expenses relating to the formation of the company.

Expenses relating to the formation of the company can still be claimed as a business expense, though there will be no tax relief applied. As you would be likely to fund such costs yourself, you would look to reclaim the relevant balances from the company, once the business has the sufficient funds available to do so.

You should ensure you keep accurate and detailed records of any pre-incorporation expenditure.

Reclaiming VAT

If you are going to be VAT-registered you should safely retain copies of the VAT receipts for all expenses, so that the relevant input VAT can be reclaimed from HMRC.

You can reclaim VAT on the pre-incorporation goods and services, as long as they were incurred wholly, exclusively and necessarily for the purpose of your company’s trade.

There is a reclaim time-limit of four years for purchases of goods and only six months for purchases of services.

Some typical pre-incorporation expenses may include;

  • Equipment to be used exclusively by your business, such as a laptop.
  • Professional fees, such as accountancy costs.
  • Printing costs, stationery, or postage.

More on limited company expenses you can claim for and VAT.

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