Best (accounting) practice for a pre-launch trial

[MisterMusty]

I'm planning to run a trial of a new business idea (before I invest in it more fully) to prove there is demand for it.

For that trial I'll need to purchase various things (it's a food business so some food, packaging etc) and hire a few things (kitchen hire, van hire, packaging machine hire etc).

I'd like to ask if there are any things I should be sure to do during the trial to ensure I can claim back any costs against tax if I go ahead and launch the company after the trial?
- ie is it wise to incorporate the company before the trial rather than wait for the 'proper' launch?
- ie should I have all invoices made out to the company rather than to me if that might make offsetting them easier post-incorporation?

Any accounting-related tips would be greatly appreciated.

(Also - My understanding re: VAT is that as all my goods will be exempt I will not be able to register for VAT or claim back VAT on any business expenses - am I right?)

Thanks.

 

[BobBuilder]

Any accounting-related tips would be greatly appreciated.

(Also - My understanding re: VAT is that as all my goods will be exempt I will not be able to register for VAT or claim back VAT on any business expenses - am I right?)

Thanks.

Do you have any other income?

Roughly what type of food business is it?

 

[elaine@cheapaccounting]

You are trialling the business - so I assume you intend to make sales. You will therefore need to register as a sole trader or set up a limited company.


If you think you may make a loss and have other income it may be best to set up as a sole trader initially. Only your personal circs and a chat about these to an accountant can decide the best approach here. Not enough info here to give specific advice.


Do you want to protect a business name?

Why do you think you are exempt from vat?


Good luck

 

[MisterMusty]

Thanks both for your replies.

I don't have any other income.
I do expect the trial to make a loss.
I would like to protect the name but I assumed the only way I could do that would bento pay for a trademark and that's more than I'm willing to spend on the trial phase.
I'll be making ready meals to be sold through local retailers, which are VAT zero rated and I saw on HMRC site that a business that sells exclusively VAT exempt products can't register for VAT. I'd love to be able to register for VAT so I could claim it back on machinery purchases but I think I won't be able to.

Thanks again.

 

[StevensOnln1]

With VAT, zero rated is NOT the same as exempt. Zero rated means that VAT is charged on a sale, but at 0% and allows the seller to reclaim VAT on their input costs. Exempt means that no VAT is charged and does NOT allow the seller to reclaim input VAT.

 

[MisterMusty]

Thanks StevensOnIn1,

With the food I plan to produce being zero rated rather than exempt, that's good news.

So I would be allowed to register for VAT, even though I might never charge a penny in VAT on my food sales, and be able to reclaim all the VAT I have paid out to suppliers for (eg) machinery bought?

If that's the case it's a far rosier outlook than I had thought!

 

[StevensOnln1]

I'm not an accountant, but AFAIK you are correct.