Lesson 7 - Pre trading expenses.

Let's continue with our?FREE course "Income Tax Return". Today?let's move on to have a look at Lesson 7 Pre-trading expenses.

You can claim pre start-up expenses incurred in the three years prior to the commencement of the trade. However, some conditions have to be met so these expenses can qualify for a tax relief.

What conditions need to be satisfied?

This tax relief applies to both sole traders and limited companies which commenced trading on or after 22 January 1997. The deduction is available in respect of pre-trading expenses which:

• are incurred in the three years prior to commencement of the trade or profession,
• are wholly and exclusively related to your business.

You need to keep in mind that if any of these expenses were not entirely related to the trade, you will not be able to reclaim them.

What types of expenses can qualify?

In general, the vast majority of goods or services you purchase before starting a business will qualify. The most common pre-trading expenses are as follows:

• accountancy fees,
• legal fees,
• advertising costs,
• costs of feasibility studies,
• costs of preparing business plans,
• costs of creating and maintaining a website,
• training or courses related to your business,
• office equipment costs,
• cost of renting business premises.

Remember to keep all relevant invoices and receipts as your accountant will require them for your annual tax return.

How can you claim pre-trading expenses?

Goods or services that you purchased before the trade commenced will be treated as your trading costs incurred as if you were already in business. These costs will be offset against your trading profits and as a result, they will decrease your tax liability.

These allowable expenses are not available for offset against income other than income from the trade or profession. It is possible to carry forward this allowance and offset it against future trading profits.?

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