Time limit for pre-trading capital expenditure?

Time limit for pre-trading capital expenditure?

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Is there a time limit for pre-trading capital expenditure?  I know that revenue expenditure must be incurred no more than seven years before the trading start date of the business to be able to be included in the first accounts (and obviously be wholly and exclusively for the purposes of the trade) but I have scoured the capital allowances manual on the HMRC website and can't find a reference to such a time limit for capital expenditure. 

Client seems to be thinking that there is a "12 month rule" but I have not come across this, and it seems very short - surely capital expenditure might be reasonably incurred more than a year before the start of trading - the business in question is a furnished holiday let which was completely renovated prior to being let out.

Thanks in advance for any advice!

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Teignmouth
By Paul Scholes
27th Nov 2011 22:54

Was it spent for the purpose of the new biz?

Sounds like it was and so any such expenditure is treated as taking place on the first date of the business (ie when letting commenced).   CA Act 2001 S12.  So no time limit but in reality would tend not to be a long period as it has to be spent for the purposes of the business.

In other cases, eg where you bought an asset for personal use years ago and then brought it into the business you still treat the expenditure as taking place on day 1 but at value rather than cost.

 

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By DMGbus
28th Nov 2011 09:00

VAT claim time limits

You haven't specifically mentioned it, but worth considering is the input tax "pre registration input tax reclaim" rules:

On physical goods/assets in possession at date of VAT registration: Must have been purchased no less than 4 years prior to VAT registration.

On services : Must have been incurred no less than 6 months prior to VAT registration and NOT been "consumed" before registration date.

Regarding the income tax (capital alloweances) rules I don't recall ever having come across a "12 months" rule and entirely agree with the answer given by Paul Scholes.

 

 

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