Expenses for a business that doesn't exist yet

[Alice M]

Hi, I'm hoping you can help. I've decided to set up a new business (sole trader) but for various reasons it won't be until the back end of 2020. I want to start buying equipment for the business now. It's been explained to me that my options are:

1. Register for self employment now and account for the expenses at full value in the 2019-20 tax return (with zero income). Carry forward the losses to the next tax year and argue my point with HMRC if I get checked.
2. Register for self employment next tax year, bring the assets in to the business at a depreciated value and account for them in the 2020-21 tax return (with income).

Have I been given duff information or have I understood things correctly? Thank you as always!

Alice

 

[StevensOnln1]

You don't register as self employed until you're ready to commence trading. You can claim for the full cost of goods bought up to 4 years before you started (make sure you keep receipts as proof), you don't need to depreciate anything provided that the items purchased have had no personal use.

 

[mattk]

Unless you're being offered a deal which won't be repeated, why not put the money in a savings account and wait until you're ready to start before buying equipment?

Circumstances change and you run the risk of buying things which you then have to liquidate quickly and at a loss if you decide not to go ahead with your plans.

 

[Scalloway]

You can claim for the full cost of goods bought up to 4 years before you started

You can go back 7 years.

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46351

Any expenditure made before you start trading goes through your accounts as if it was incurred the date trading started.

 

[Alice M]

Hi there, thank you for all the amazing replies as always! That's absolutely fantastic and exactly what I hoped, great news on the 7 years too.

Thanks again!

Alice