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Pre- Incorporation Training Expenses

Are pre-incorporation training expenses ever allowable?

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Good Afternoon

A client has passed to me an invoice dated for the month prior to incorporation for some training. The course itself was 2 weeks prior to incorporation.

I know there was an intention to form the company prior to the date of the invoice and there should be records to back this up - assuming they kept minutes of meetings between the 4 (now) directors and the invoice is to one director but paid by another. ie the person who went on the training was not the person who paid the invoice.

The training itself was CAA pilot competency which is a requirement to operate a drone commercially - the company provides aerial videos for clients and but for some unfortunate timing there would be no issues. If only they had formed the company before sending a director on the course...

At the time of the course there was no company and so it would appear that Silva v Charnock is likely not to be in point but if anyone has any thoughts on how to treat this within the company accounts and CT computation I would be most grateful for their thoughts.

Thanking you all in anticipation.


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08th Feb 2019 21:18

Tricky. Pre-trading is one thing, but pre-incorporation quite another.

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09th Feb 2019 09:31

With respect, you are asking the wrong question. The accounting treatment of payments made to, or on behalf of, directors is not difficult and of course there is no adjustment in the tax comp.

What I would be wondering is whether there was an obligation to operate PAYE when the payment was made. You have not provided enough facts to answer that with certainty.

Thanks (1)
By EllaB
to Tax Dragon
09th Feb 2019 21:14

Thank you Tax Dragon.

No reimbursement has happened at the moment but yes this would be PAYE rather than CT , not my finest moment.

The company could not trade without one person passing a CAA Drone Pilot Competency Course. This is the training in question.

The invoice was made to the (now) director who attended but it is another director who will be reimbursed (two couples make up 4 directors - 2 do most of the work the other 2 covered most of the start up costs).

The company will be meeting the liability of Director A when it reimburses Director B.

As the company was formed 2 weeks after the training course it seems clear that this cannot be treated as a reimbursement of training costs which can be exempt from IT by virtue of S250 ITEPA.

And Silva v Charnock cannot be brought into play - again as there was no entity to be the employer /would be employer at the time the course is attended.

So, if Director B is to be reimbursed, Director A will need to report the payment as PAYE?

If there is something else to consider I would be grateful if you could point me in the right direction.

Many thanks again

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to EllaB
07th Apr 2019 23:15

Did you clarify this EllaB? My client is in a similar situation. The company is baby swim lessons and director did the mandatory STA training before incorperation. The reason for not incorperating was that there was deliberation on the final name (business is a licensed brand so the area name had to be agreed with the licensors). Will this be an expense paid back through PAYE or can it be allocated to the directors loan account or as a company expense for CT?

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