Limited Company - Accounting Period

[getnoticed]

A friend of mine has recently formed a Limited Company and is filling in the CT41G form, but will not be starting to trade for several months and wishes to stay dormant until such time as he is ready to trade.

If he stays dormant and chooses to advise HMRC when he starts trading, can he claim for start-up expenses in his first tax year?

eg - Company Formed June 2008 | Starts trading September 2008 and has an accounting start period of 01 September - can expenses incurred prior to 01 September be considered?

If not, apart from having to file a return sooner is there any disadvantage of starting the accounting period immediately even though trading will not commence for several months?

[primeaccounts]

It is quite acceptable to claim pre trading expenditure. As long as they are properly receipted and genuine business expenditure (for example, stock, stationery assets etc).

[Kent Tiger]

A couple of thoughts:

If there has been expenditure, then is the company actually dormant? Expenditure means trading, albeit at a loss ATM.

To the best of my knowledge there is some flexibility over accounting periods. The first period could be more or less than 12 months. Can't remember the exact rules, but I think it's as simple as telling Co's Ho when the first accounts will be made up to.

[James Smith]

Glenn,

if the money has come out of the ltd co. bank account then its not really dormant as above. If its come out of directors funds as I imagine it would then I would stick this in as "pre-trading" expenses when it comes around to it.

You can set the accounting periods as you see fit but remember to align to the ltd co. dates with companies house or it will all go horribly wrong when your accountant picks this up. Probably the best thing to do would be to pick a long period of account - you can go up to 18 months but this does mean the returns need to be completed sharpish as the due dates are in part based on incorporation. From HMRC's point of view the maximum period is 12 months and they split an 18 month period into a "long" period of 12 months and a "short" period of the remainder.

hope that helps - and wondered where you where hanging out these days, not seen you about much lately!

Regards,

[getnoticed]

Thanks James, a very helpful answer indeed.

... wondered where you where hanging out these days, not seen you about much lately!

I've been keeping a low profile as I got a promotion 18 months ago that has kept me busy working on projects all the hours available.

I have also been helping a number of people get themselves and their companies off the ground and have a new company myself which I am in the process of securing client and supplier relationships with. The company is nearly ready to launch and I am toying with a soft-launch in July.

[James Smith]

Good to see you haven't been idle then, hope the new business works out for you.