A company that was renting out residential properties bought some land with the view to building lodges to rent out. It has since sold the residential properties but hasn't yet built any lodges. It's incurring some expenditure - mainly loan interest. I'm not sure how to treat this expenditure. My initial thought was it creates a loss to carry forward, as it was already in property business renting houses. However I'm not sure if the 2 activities are close enough to be classed as the same business?
If it's the case that the residential letting business has in fact ceased, there's the question of when the new business commences, which I think would be when they are in the position to offer the lodges out to rent. If that's the case, the expenditure currently being incurred would be pre-trading expenditure. How would I deal with that in company accounts? Is it included as some kind of prepayment and transferred to the P&L when trade starts? I've never come across this situation before.