claim back pre-trading expenses

How to Claim Back Pre-trading Expenses from your Company?

This post will give you an idea of Pre-trading Expenses and how you can claim them. 

In case you have pooled in from your own pocket to set up your own company, what is the scope to claim the expenses after your company is finally incorporated. It is common among owners of small businesses to invest from their own assets for start-up expenses. This process soaks up a huge amount of the owner before the business actually starts to run. 

self assessment expenses

It might include a list of expenses that are:

  • Cost to make an operational business account.
  • Traveling expenses for business meetings.
  • Business insurance policy.
  • Payment for advisory to help your business running. 

In this post we will cover:

  • How to Define Pre-trading Expenses?
  • Terms and Conditions
  • How Can I Claim Pre-trading Expenses?


 Seeking for smooth processing to claim your expenses? Get in Touch with Accotax for Expert Advice!


How to Define Pre-trading Expenses?

The amount you an individual invests to start up a business before it is actually incorporated is Pre-trading Expenses. Generally trading is not possible until you are capable of offering some kind of products or services to your customers. Typically the expenses that are common to set up small business include the following:

  • Working Equipments for business like computer, laptop atc
  • Telephonic Bills
  • Printing facility and required stationary
  • Traveling cost for business meetings.
  • Insurance and business account funds

Furthermore, the amount spent on rental payment for the premises, marketing and advertising can not be denied. 


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Terms And Conditions:

There are certain terms and conditions that are needed to be met before you intend to claim for the expenses. 

  • Ensure the expenses are tax deductible.
  • You are a VAT registered Limited Company.
  • You can claim VAT if any services were received for six months before trading.
  • Expenses must be claimed with intention to grow the trading further.
  • The cost of company formation can not be claimed.
  • If you have another running company, the expenses relating to that can not be claimed.
  • Expenses spent on training and courses can not be claimed before the start of trading.

Above mentioned are some of the basic conditions one needs to know before claiming the expenses. Whereas, if you intend to learn more then spare a few hours for HMRC or click the link given below for a swift guide. 


For more guidance and information, click here!


How Can I Claim Pre-trading Expenses?

If you intend to claim for Pre-trading Expenses, it is a must for it to be tax deductible. In some applicable cases expenses were incurred during the owner’s trading and sometimes the expenses are incurred within seven years of initial trading. 

However, to meet the conditions the owner has to show that these expenses were incurred on the first day of trading for a smooth processing. Relate it to the initial stage of trading or as an addition to the other business expenses. Let’s look into a case study for even better understanding.

Emily starts her small business of a coffee shop on 1st July, 2021. She plans to avail the lease offer of 99 years for the shop and pays the cost in June, 2021. Since , such expenses are taken from the profits of trading. She can not count it in Pre-trading Expenses and hence can’t claim them. The most frequently asked question is about tax relief and the capital invested before trading. These expenses are taken as the expenses of the first day of trading. The handling of these expenses also depend on the type of accounts you prepare are either cash based or accrual based. Cash basis accounts are able to claim for business expenses whereas, accrual basis accounts will claim for capital allowance



To Conclude, we may say that claiming pre-trading expenses can cause a great boost to flourish the business further if done in the right way. In this regard, record keeping for your expenses is very important in order to avoid chaos at the stage of claiming for expenses. This will help for a convincing demonstration on behalf of your company to enjoy the benefits of getting your expenses to flourish the business even more.

Talk to our Accountants to claim Pre-trading Expenses as there are many grey areas that can not be explained completely in the post!

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