I have a new client who is a consultant working through his own Ltd Company. The company was incorporated in February 2011.
In the process of preparing his first set of accounts for the year ended 29 February 2012.
He has asked to put through pre incorporation expenses totalling £10k which date back to July 2010 so we are talking 7 months before incorporation. I have asked the client to confirm that they were all necessary in forming his Ltd Company and he has said the following which has got me worried:
"All of these above costs were prior to incorporation, but so was the bulk of the work that generated income. I would estimate perhaps 75% was done prior to incorporation and then billed immediately after incorporation."
My question is simple - can he put this income and expenses from before he incorporated through his Ltd Company like this or should it be reported as Self Employed income (he was not registered as self-employed) or even employed income.
To the best of my knowledge there were no contracts in place for the work carried out and if there were then they could not have been between the end client and his Ltd Company as it would not have existed.
Any help and advise (more than "walk away" from the client - which I am contemplating) would really be appreciated.