Tax advice of the week: Claim pre-incorporation expenses

If you spend money setting up a business before you have formed a company, the person who runs up the expenses must be the one to claim the tax relief. That's a problem if your company wasn't formed when the expenses were incurred. So what's the solution?

It's fairly common to run up expenses setting up a business before you have formed a company, says Tax Tips & Advice. However, under the pre-trading expenses rule, the person (or company) who incurred the expenditure must be the one who claims the tax relief. That clearly poses a problem if your company wasn't formed at the time that the expenses were incurred. "So is there a solution?"

Thankfully, yes. Take Jim, an engineer who was made redundant in 2007. After incurring several hundreds of pounds worth of travel expenses, he then set up a company on 1 April 2008. Jim can still claim his pre-incorporation travel expenses from his company, and his company can then claim corporation tax relief in its 2009/2010 accounts.

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