Starting up a new business can be an extremely expensive process. While everyone knows that it's essential to claim your business costs against your profits to lower your tax liabilities, some small business owners and self-employed individuals may not realise that it is possible to claim business costs that were incurred before your business technically started trading.
When preparing to launch your business, be sure to keep proper records and all receipts from purchases made for items that will be used for the business. Once your business launches, you'll be able to enter these as expenses in the official records of the business on the very first day. While kicking things off by doing accounting may not be the most motivating first step in launching your business, it's absolutely essential to ensure that you get properly reimbursed by the business for your launch expenses.
The easiest way to ensure that everything is perfectly legitimate is to use an expense form template, record all your expenses and then attach any receipts or other supporting documentation with the form and keep it with the rest of the business accounting records for that tax year.
In addition to claiming your launch expenses against your profits, it's also possible to reclaim some or all of the VAT that you paid during the launch process. If you're claiming VAT on goods you purchased, you can look back as far as four years before you registered for VAT, while on services you purchased the window is only open for 6 months prior to registration.
Time isn't the only factor, however, as there are other rules that apply to the reclamation of VAT. With regards to goods,, the goods must also meet three critera: they must have been purchased by the same individual who is now registered for VAT, they must be for justifiable business purposes similar to what you would claim during the normal course of business, and the goods must still be in your possession or have been used to create other property you still have in your possession.
In short, if the item you purchased was completely consumed before your VAT registration date, such as petrol or electricity, it is not eligible for VAT reclamation. Additionally, VAT cannot be reclaimed on any products that were sold to customers before the registration date.
When preparing to launch your business, be sure to keep proper records and all receipts from purchases made for items that will be used for the business. Once your business launches, you'll be able to enter these as expenses in the official records of the business on the very first day. While kicking things off by doing accounting may not be the most motivating first step in launching your business, it's absolutely essential to ensure that you get properly reimbursed by the business for your launch expenses.
The easiest way to ensure that everything is perfectly legitimate is to use an expense form template, record all your expenses and then attach any receipts or other supporting documentation with the form and keep it with the rest of the business accounting records for that tax year.
In addition to claiming your launch expenses against your profits, it's also possible to reclaim some or all of the VAT that you paid during the launch process. If you're claiming VAT on goods you purchased, you can look back as far as four years before you registered for VAT, while on services you purchased the window is only open for 6 months prior to registration.
Time isn't the only factor, however, as there are other rules that apply to the reclamation of VAT. With regards to goods,, the goods must also meet three critera: they must have been purchased by the same individual who is now registered for VAT, they must be for justifiable business purposes similar to what you would claim during the normal course of business, and the goods must still be in your possession or have been used to create other property you still have in your possession.
In short, if the item you purchased was completely consumed before your VAT registration date, such as petrol or electricity, it is not eligible for VAT reclamation. Additionally, VAT cannot be reclaimed on any products that were sold to customers before the registration date.
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