London Registrars (https://www.london-registrars.co.uk/) provides businesses of all sizes and at all stages of trading with corporate and legal support, from company formations toÂ company secretarial services. For start-up businesses, managing costs effectively is a particular concern. Here is London Registrars’ guide to how to account for company start-up costs.
One would presume that anyone setting up a business would be keeping a keen eye on costs, but the fact is that when it comes to claiming tax relief for a new company’s start-up costs, a surprising number of start-ups fail to prove what those costs were. Mostly that is down to a lack of knowledge of exactly what those costs were and how to account for those costs. For costs to be eligible for tax relief, a company must be able to show that they were genuine ‘pre-trading’ costs incurred during the seven year period before they started trading. They also need to prove that those costs were ‘wholly and exclusively for the purpose of the trade’ (although some capital expenses and similar types of expenses would be excluded).
All start-ups need to have the foresight to keep relevant receipts in the seven year period running up to trading – that is receipts for any ‘pre-trading expenses’. If in doubt about whether a receipt falls within that category, check with your accountant or the tax authorities. Once incorporated, the start-up can then claim tax relief on any relevant costs incurred in the seven years preceding trading with the proper documented proof. This is because the tax authorities will formally consider them as having been incurred on the first day of trading.
London Registrars can assist with every aspect of company formations and company compliance, helping start-ups begin their corporate journey on the right foot. Find out more athttps://www.london-registrars.co.uk/.