Commentary

B2.460 Pre-trading expenditure

Business tax
Business tax | Commentary

B2.460 Pre-trading expenditure

Business tax | Commentary

B2.460 Pre-trading expenditure

The tax legislation recognises that trade-related expenses can often be incurred before a trade formally commences. The expenses will be treated as if they are incurred on the day the trader commences formal trading, and therefore allowable, if1:

  1.  

    •     expenditure is incurred in the seven years before the trade commences

  2.  

    •     the expenditure would have qualified for a deduction had it been incurred on the day the trader started to carry on the trade and

  3.  

    •     no deduction is otherwise available

The type of expenditure that qualifies for relief under these provisions includes the rent and rates of premises to be used for the purposes of the trade and employees' wages.

However, expenditure on the formation of a company or other capital expenditure would not be allowable under usual principles. Where expenditure is incurred, for example, on the appraisal of the trade, its viability,

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