Claiming Expenses Prior to Ltd Formation

[Peter Loew]

Hi Guys,

I was contracting under Giant before I set up my Ltd, and during that time incurred legitimate business expenses that I could not claim under Giant (Laptop, etc.)

I then set up my own Ltd and am almost at the end of my FY.

My question is, can I claim for those business expenses through my Ltd, that I incurred before its formation?

P

[Sockpuppet]

Yes. Depends on the length before the company was set up. My accountant mentioned 6 months to me.

Ask yours.

[BrowneIssue]

Yes. Depends on the length before the company was set up. My accountant mentioned 6 months to me.

Ask yours.

I got told that I could claim for things I had owned for years, such as a desk, office chair, bookcase, typewriter, stationery and other bits (that, 12 years later, the company still owns). I had no receipts for them, they got bundled together into a list with a guesstimate of a 2nd hand value and the company bought the lot off me.

[[email protected]]

The 6 month rule applies to claiming vat. Anything purchased that the company still has in its possession, the company can reclaim input vat up to 6 months prior to vat registration.

[Peter Loew]

Brilliant. Going to get in touch with the old accountant and make some claims!

P

[r0bly0ns]

I got told that I could claim for things I had owned for years, such as a desk, office chair, bookcase, typewriter, stationery and other bits (that, 12 years later, the company still owns). I had no receipts for them, they got bundled together into a list with a guesstimate of a 2nd hand value and the company bought the lot off me.

Sounds to me like you didn't put their purchase through as expenses, but instead sold them to the company.

There is a subtle difference (isn't there always with hector!), especially if you are reclaiming VAT.


I have been advised by our accountant that you can do either, as long as:

i) If putting through new purchases before company formation as company expenses, they must have been made within a certain time frame of the comapny being formed, the HMRC website will have details.

ii) If selling personally owned items to the comapny, they must be sold at a 'reasonable' 2nd hand value.

[dude69]

Sounds to me like you didn't put their purchase through as expenses, but instead sold them to the company.

There is a subtle difference (isn't there always with hector!), especially if you are reclaiming VAT.

It ain't that subtle.

Basically one is 'You are planning to set up a company, and need to have certain business tools/assets for that company.' The assets are purchased by you for the purpose of that company. This is a pre-registration expense. You have to have bought it with the company in mind. The maximum period is six months before registration.

The nice thing with this is you can reclaim input VAT on pre-reg expenses, even if you go on to Flat-Rate scheme on Day 1.

The other is 'You personally own some tools that you bought purely for your own use, but you now find would be useful for the company'. You sell them to the company at a reasonable second-hand value. (But be aware BIK is surely impied in this scenario if the assets are at your disposal given that they were yours previously, you must have wanted it. Since the 2006 budget, there is no longer ANY allowance for computers for or partly for private use.) http://www.hmrc.gov.uk/budget2006/bn30.htm

I do not see how you can reasonably sell your business your home PC (pre-reg purchase is quite different) and then not declare it as a Benefit-In-Kind on your P11D. Of course the BIK tax would far exceed any gain made by selling your PC for £200.

Much better to retain your home PC for your own use (which can be a 10-year-old brick), and have a whizzbang flashy one owned by the company declared purely for corporate use.

[Peter Loew]

Spoke to the accountant. I can invoice my company for the current 2nd hand market value of the laptop.

Luckily, Apple Macs don't really go down in value that much

[dude69]

Spoke to the accountant. I can invoice my company for the current 2nd hand market value of the laptop.

Yes, but any tax inspector would find it impossible to believe that you would not continue to use it for personal use (unless you buy another one with your own money, which, from a tax point of view, makes no sense), and therefore you should declare it on your P11D and pay personal income tax on 20% of the original price.

So not worth doing, unless you either want to

(a) pay personal income tax on the value of the laptop OR
(b) commit tax fraud and not declare it on the P11D and risk penalties and back taxes

[BrowneIssue]

Sounds to me like you didn't put their purchase through as expenses, but instead sold them to the company...

I did both. Things for which I had a receipt were my first expenses, those without were lumped together as a purchase.

I didn't do a very good job of reading the question.