Hi Everybody,
Company set up fees are non tax deductable and are capital costs. I have queries about company set up fees:
- Can company set up fees be capialised?
- If can, how many years will the costs be amortised?
Many thanks
Andi
Replies (9)
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The company set up fees are the cost of the subscribers to the company.
The company itself cannot incur costs before it was 'born' so to speak.
They are a tax 'nothing'.
How much are you talking about - surely only a few hundred maximum?
I think the OP knows they are a tax nothing - see their opening sentence.
The question I think is about the accounting treatment when they are borne by the company - which often happens despite what you say.
Yes they can be capitalised but the practice of doing so is now rather old hat. Much better to write them off on day 1.
The potential tax on this at 20% and falling can only be a few quid, surely.
I wouldn't be thinking of amortising something so trivial.
Fifty years ago, it was common practice to stick Formation Costs on the Balance Sheet and leaving them there for ever. Never understood how they were an asset myself and the practice died out in the '70s.
My current experience is to see formation expenses / costs invoiced to the company and taken to P&L and then disallowed for CT.
In the 1970's and 1980's I recall that formation costs were again billed to the company, but then shown as an asset on the Balance Sheet.
[quote=]
My current experience is to see formation expenses / costs invoiced to the company and taken to P&L and then disallowed for CT.
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This is exactly what we do.
If it's a personal cost, wouldn't the easiest way be to just debit it to the DLA?
Adding an expense back doesn't eliminate the personal tax situation.
For the record, I think I've just treated this in the same way you have - but it's made me rack my little brain.
Is the formation cost an asset? Does it have a future value?
I would say no to both. It is a past cost, therefore write off to it net realisable value of nil.
Is the formation cost an asset? Does it have a future value?
I would say no to both. It is a past costs, therefore write off to it net realisable value of nil.
I agree - I never understood it even when it was common practice 40 or 50 years ago.