Client set up a new Ltd company in April, but incurred expenses prior to this. Company has received no income and is in R&D phase. Should these expenses be included in the first year's accounts?
Can the pre-trading expenses of a newly formed Ltd company be included within the first years accounts, or should they be included in the companies CT return for the period trading commences. It would be preferable to include them in the first year's accounts, as presumably the double entry would be to director's loan account.
Any thoughts welcome
John Martin
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Accounting treatment depends on nature of expenditure
For tax purposes, expenditure incurred in the seven years prior to the commencement of trade can be claimed against corporation tax i.e. it is deeded incurred on the first day of trading.
In terms of accounting treatment you need to refer to Statement of Standard Accounting Practice 12 (SSAP12) as the accounting treatment depends on the nature of the expenditure incurred. You may wish also to consider UTIF 24 on 'Accounting for Start Up Costs'.
Additional Info
Sorry forgot to mention that expenses incurred by directors prior to incorporation - would this preclude a claim as expenses not directly incurred by company prior to trading?
Is the UTIF 24 available on the web somewhere?