Claiming Pre-Incorporation Expenses: What You Need to Know 💡

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Starting a new business comes with plenty of upfront costs, but did you know that you can claim some of these expenses even if they were incurred before your company was officially formed? If you’ve spent money on business-related costs before incorporation, you might be able to offset these against your company’s tax bill. Let’s break it down! 📊

What Are Pre-Incorporation Expenses? 🤔

Pre-incorporation expenses (also known as pre-trading expenses) are costs incurred before your company is officially registered with Companies House. These are expenses that were necessary for setting up the business and would have been tax-deductible if they had occurred after incorporation.

HMRC allows businesses to treat these costs as if they were incurred on the first day of trading, meaning you can still claim them when preparing your company’s accounts.

What Expenses Can You Claim? ✅

You can claim a variety of pre-incorporation costs, including:

Professional Fees – Legal, accounting, and consultancy costs 📜
Website & Branding – Domain registration, logo design, and website development 🌍
Equipment & Software – Laptops, business tools, and software subscriptions 💻
Travel Costs – Business-related mileage and transport 🚗
Marketing & Advertising – Pre-launch promotions and ad campaigns 📢
Training & Development – Courses or certifications to upskill for your business 🎓

However, personal expenses and non-business-related costs won’t qualify —so keep those receipts separate! 🧾

How to Claim Pre-Incorporation Expenses 📑

1️⃣ Keep Proper Records 📂

Make sure you keep detailed records of all expenses, including invoices, receipts, and bank statements. HMRC may request evidence, so good record-keeping is key.

2️⃣ Record Expenses in Your Company Accounts 📊

Once your business is incorporated, these expenses should be logged as business costs. They will be treated as if they were incurred on your company’s first day of trading.

3️⃣ Reimbursement to the Founder 💰

If you paid for these expenses personally before incorporation, the company can reimburse you once it has a business bank account and funds available. This reimbursement is not taxed as personal income since it is a legitimate business cost.

4️⃣ Include in Your Corporation Tax Return 🏦

Pre-incorporation expenses reduce your taxable profit, which means your company could pay less Corporation Tax. Ensure they are included in your first company tax return.

Common Pitfalls to Avoid ⚠️

❌ Mixing Personal and Business Expenses

Always keep a clear distinction between personal and business costs to avoid confusion and potential tax issues.

❌ Trying to Claim Non-Qualifying Expenses

Personal meals, entertainment, or other non-business-related costs won’t be accepted as valid expenses.

❌ Forgetting to Record and Submit Expenses

Missing receipts or failing to record expenses could mean missing out on tax relief, so keep everything organised!

Reclaiming VAT on Pre-Incorporation Expenses 💷

If your business is VAT-registered, you may also be able to reclaim VAT on pre-incorporation expenses. This can be a great way to recover some costs, but there are specific rules to follow. We’ll cover this in more detail in an upcoming blog—stay tuned! 📢

Final Thoughts 💭

Pre-incorporation expenses can be a valuable way to reduce your business tax bill, but only if they’re properly recorded and claimed. If you’re unsure which costs qualify or need help filing your first company accounts, Dead Simple Accounting is here to help! 😊

Got questions? Get in touch and let’s make tax dead simple for your business! 🚀