What does a "trading" mean?

[sikander]

Dear All,
I'd registered a limited company few months back. However, am still in the process of setting it up (website development and trying to arrange certain licenses/partnerships which i require to do business). I still need around another few mos before which i can start selling my services. However during this period i'm incurring expenses related to the new company. My questions is regarding the form CT41G? Do i need to file this even though i'm still not doing any business? or i should wait when everything is ready and i start selling and then i file it.

Please advise.

Regards,
Sikander

 

[birdman]

Form CT41G needs to be submitted within three months after the company commenced trading, or you may be charged a penalty.

 

[sikander]

birdman: can you define "commenced trading"?

Regards,
Sikander

 

[birdman]

Sikander

"Commenced trading" means when the company makes its first sale, irrespective of whether the company gets paid immediately or later.

HMRC state "a company becomes active by acquiring a source of income..."

 

Hi Birdman,

I was told you are meant to inform HMRC within three months, once you start promoting a business, regardless of trading. What you have said makes more sense to me. Does anyone know the score?

 

[birdman]

Not strictly true. You have to inform HMRC when the company comes within the scope of Corporation Tax, and this is when it starts trading. You have 3 months from starting to trade to notify HMRC or you incur penalties.

However, if you do not intend to trade immediately then you do not need to complete form CT41G, but instead write to HMRC and tell them the date that you intend to start trading. You then send the form in when you start to trade.

 

[bwglaw]

That source of income could also include capital or any interest on the account. You should seek advice from an Accountant.

 

[sikander]

Just to confirm...this means if i register a limited company but i spend the first year setting it up i.e. infrastructure, website setup etc. i do not need to register with hmrc. One more point to add.. the first year i've spent money on the company but let say didn't make a sale?

 

[birdman]

The whole point of being forced to register with HMRC is so that they can start taxing you as soon as you make a profit. No taxes on losses. In your situation you say that you have not yet made any sales and therefore have not yet officially started trading. It is customary to spend money on a business before it actually starts to trade.

However, you must write and inform HMRC with the date that you expect to commence trading.

 

[bwglaw]

When you form the Ltd Co HMRC will be notified anyway, by Companies House. Contact HMRC to find out their definition of 'trading' and I believe it is when you officially open your doors for business. This could be as soon as you advertise or open bank account not necessarily when you raise your first invoice, or when you get first payment.