Am I correct in thinking that company formation costs are allowable as a company expense?
Ben
Replies (5)
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small but useful
As the formation fees are usually paid by the promoters and not the company, then they should be introduced by journal as a DLA item even if disallowed in the CT comp.
Split them
I tend to treat the formation fee only as capital and the incidentals (such as the agents' cost of printing the M&AA, etc) as expenses. It is usually pretty insignificant though. Any additional fees, such as setting up the statutory books are post-formation, so would be expenses.
Trivial
These days the actual formation costs are pretty insignificant - £40 or less. If structured properly most of the accountancy costs involved are allowable.
Revenue or Capital
Technically Ellen is right in that it is really a capital expense. In reality if the expense is small, as David says, it is unlikely to be challenged as it would not be significant. However, more complicated formations where higher costs are involved should certainly be treated as a capital expense.