New venture - VAT, director's loan etc queries

I'm a lawyer but about to commence mediation training and have queries re financial/tax efficiencies

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Hi - grateful for any advice/suggestions those more qualified than me might have on how to execute certain financial aspects of my new business strategy.

In short, I am a lawyer but am about to start my training to become a mediator. The training and accreditation process can be fastracked, so in theory I should be able to accept instructions as a mediator in July (two months from now). The training is quite expensive (circa £5k) and I will have various related setup costs including travel and accomodation during the residential training period, a requirement to secure some insurance and probably some miscellaneous expenses like a new laptop, website etc.

My provisional view (and I am not a corporate lawyer or tax expert so some of this is well outside the boundaries of professional competency) is that I will incoporate a limited company with me as sole director. I will extend a director's loan to the business to pay for the training and associated costs and, in turn, when I start to receive instructions I will use the corporate vehicle for invoicing purposes. As I understand it the training costs will be treated as capital costs because they relate to the acquisition of new skills, so they're not tax deductible.

My questions are:-

1) am I right that the costs are not tax deductible?

2) presumably I can recover the VAT paid on the training etc once the business gets its first instructions? In other words, the issue of the costs not being tax deductible has no bearing on the VAT position? I recognise, of course, that I will need to register for VAT.

3) any views on whether my proposed structure makes sense and that incoporating and using the corporate vehicle to absorb the start up costs/extend a director's loan has merit? The idea is obviously to make the process as financially efficient as possible, especially at the point when I start to hopefully receive some instructions and the business starts to make some money.

Any help would be much appreciated.

Thanks

Replies (5)

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By paul.benny
19th May 2024 17:04

OP - a couple questions for you. Would you answer detailed questions from someone who isn't a client? And do you think this non-client would be wise to rely on your responses.

When you answer those, you might realise why some responses here are less than friendly.

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By tomkim10
19th May 2024 17:58

Thanks for your questions. I certainly had no expectation that I would get a fully formed advice of the sort that someone might expect from a retained professional, but I have seen that many (though evidently not all) on this forum seem to be happy to provide brief, helpful and constructive responses to queries. I sought to frame my question in such a way as to show that I have formed some initial views and was hoping for a bit of a "sense check"

Would I provide some overview thoughts if someone posted a legal contractual query on this or another forum? Yes. Indeed I have on the moneysavingexpert forum.

Would I treat any advice or suggestions with a note of caution? Of course.

Whether anyone is willing or able to provide any such advice is a matter for others, but I genuinely didn't expect anyone to be "less than friendly".

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By Paul Crowley
19th May 2024 18:39

Your thought processes are along the lines of self-employment.
If you already have the company, then best to appoint an accountant now and he could advise specifically based on your circumstances.
He would want to know whether you are currently trading, an employee, or running a company. He would be in a better position to give advice based on your current position.

Thanks (2)
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By FactChecker
19th May 2024 19:06

Not surprisingly (and quite correctly) nobody on here knows the first thing about your personal circumstances - what stage are you at in your legal career? .. what other interests and/or earnings you may have? .. what your plans/objectives are? .. etc.
Without that understanding, any advice (or even mere suggestions) as to the correct vehicle for you to use for your planned endeavour would be foolish & valueless.

In terms of your specific questions:-
1) am I right that the costs are not tax deductible?
* maybe / maybe not (depends on several factors).

2) presumably I can recover the VAT paid on the training etc once the business gets its first instructions? In other words, the issue of the costs not being tax deductible has no bearing on the VAT position? I recognise, of course, that I will need to register for VAT.
* maybe / maybe not (you're correct that "the issue of the costs not being tax deductible has no bearing on the VAT position" but the VAT position *will* depend on the VAT rules relating to the specifics).

3) any views on whether my proposed structure makes sense and that incorporating and using the corporate vehicle to absorb the start up costs/extend a director's loan has merit? The idea is obviously to make the process as financially efficient as possible, especially at the point when I start to hopefully receive some instructions and the business starts to make some money.
* see above for why nothing can be deemed to 'make sense' with this dearth of detail - but you definitely need to speak to a professional adviser.
For instance, "financially efficient" can mean wildly different things if you're focussed on short-term cashflow vs longer-term extraction of monies for yourself.

Thanks (5)
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By Paul Crowley
19th May 2024 19:23

VAT
Will your clients be VAT registered?
If not then you are going to lose a big chunk of charges in VAT if you choose to register before you get to £90K a year.

Yet another reason to appoint and listen to the accountant.

Thanks (1)