Expenses for growth and new products

[yosheeck]

Hi, question about CT and deductible expenses.

Let's say LTD company does bussiness A (e.g. hourly paid software development services for specific client), and wants also to start bussiness B (e.g. develop The Cool Software, which hopefully may be sold some day to customers), but at the moment it earns income only from bussiness A.

General question is - how to legally spend money on bussiness B development.
I think I don't understand full meaning of "Wholly and exclusively for the purpose of the trade". Questions are:
1. Is expense spent on preparing/development of bussiness B deductible against CT ? (so against bussiness A) ?
2. Is this called R&D ?
3. Can the company simply hire a subcontractor (another limited company or self-employed one) ?

[tractor]

Hi, question about CT and deductible expenses.

Let's say LTD company does bussiness A (e.g. hourly paid software development services for specific client), and wants also to start bussiness B (e.g. develop The Cool Software, which hopefully may be sold some day to customers), but at the moment it earns income only from bussiness A.

General question is - how to legally spend money on bussiness B development.
I think I don't understand full meaning of "Wholly and exclusively for the purpose of the trade". Questions are:
1. Is expense spent on preparing/development of bussiness B deductible against CT ? (so against bussiness A) ?
2. Is this called R&D ?
3. Can the company simply hire a subcontractor (another limited company or self-employed one) ?

Depends on the 'trade' mostly.

If yourco provides software testing services it would be allowed to expense software testing products and costs to develop similar tools would be allowable. If yourco provided similar services but the R & D was setting up the missus with a nail parlour or dog walking business then I think it's ummmm less likely.

Ask your accountant or even call the Revenue, there may even be case studies on their web site.

Setting up separate companies might seem a good idea but in reality, they will be viewed as connected by the Revenue and you would incur all sorts of additional expense and complications. If you are thinking about widening your product/service base within the same official trade classification, then just code your accounts to reflect it so that you can analyse costs and P & L separately.

[ASB]

The nail parlour would surely be claimable if the company was going into the nail parlour business.

[ASB]

Yes, yes and yes.

the proviso is that the business is operated by company a. That is ot clear from the op.

the trade is not set in stone. It changes over time. E.g the co decides to expand its business interests into slmething completely unrelated. It is still the company trade.