I am doing accounts/return for a small business, it is their first year trading and they did not complete a tax return last year. He is a sole trader carpenter.
I have come across some reciepts from Jan/Feb 2012, before he started trading - I presume this is stock up on tools/blades and prepare his workshop to start trading. There is also a capital expense for a vehicle trailer. What are the rules on claiming expenses from previous tax year prior to trading. Everything seems pretty reasonable expenses ie small tools/screws/sanding belts etc and I can understand there will be a number of expenses required to set up a workshop prior to trading.
Pre-trading expenditure is deemed to have been incurred on the first day of trading. The expenditure has to be incurred within seven years of the start of trading and it's deductible to the extent that it would have been if the expense had been incurred after the business started trading. There's a similar rule for determining when pre-trading capital expenditure is incurred for the purposes of claiming capital allowances.
