Pre-Trading Expenditure

Starting a new business can often be expensive – whether you are buying the tools for the job, building your website or developing your product – start-up costs can often leave a business with very little cash-flow as they go into their first day of trading.

Getting those first sales is always important, but don’t forget that there are tax reliefs specifically aimed at new businesses that can help you get a step ahead.

A new business could be in development for several years before it starts trading, or could even start as a hobby and eventually become a trade. However your business started out, remember that anything you spend in this pre-trading period can likely be claimed as an expense at the end of your first accounting period, so try to keep your receipts! These could be things like:

  • Insurance
  • Advertising
  • Travel Costs
  • Telephone & Internet
  • Postage & Stationary
  • Professional Fees
  • Rent
Even without a receipt, proof of purchase can still be obtained from other documents, such as bank statements, so it’s a good idea to try and keep as much evidence as you can.


While you probably can’t claim for some large items (high-cost equipment, vehicles etc) all at once, these can still be treated as capital expenditure and written down over several accounting periods. There are some options however, such as the Annual Investment Allowance, which may allow you to recoup some of these costs in your first year, so please feel free to get in touch if you want to explore these in more depth.

VAT Considerations

Intending to be VAT-registered business? Or perhaps your turnover is expected to breach the threshold in your first year? Either way, you can claim input VAT prior to your effective registration date for up to four years for capital expenditure, and up to six months for services. While this does mean you will need to charge your customers VAT, you may be able to improve your initial cash flow by claiming back the VAT on some of your pre-registration expenses. Please contact us for more details and to find out if this will be beneficial to your business.

Using Your Losses


So now the first year of trading is done, the accounts are prepared, but all that pre-trading expenditure has created a loss. This was expected and while you know you can relieve this against any future profits, how can it help you now while you are still taking your first steps? HMRC allows new businesses to carry back some of their losses for up to three years. This means, for instance, that claiming sideways loss relief against your other income for the years preceding your first-year’s trading could potentially lead to a rebate and help inject some much needed cash into your business. This is just one of many options available to help keep new businesses ticking over, and at Atkinsons we can provide you with anaccountant in Brighton or New Malden who will be happy to help you find what works best for you.