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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am starting up my own business. I have just left full time

Customer Question

I am starting up my own business. I have just left full time employment.
I had a settlement package of £180,000. In 2014 financial year I have paid over £100,000 in tax.
I need to buy a lot of office equipment to start up my own business.
If I buy the equipment I need now will I be able to claim the costs back from the tax I've already paid?
All the best,
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.


You cannot offset the cost of equipment against your PAYE earnings without actually starting a business. As far as everyday expenditure (revenue expenditure) is concerned, under the pre-trading expenditure rules you can treat that expenditure as if it was incurred on the first day of trading. You can read about the pre-trading expenditure rules here. An example of everyday revenue expenditure would be rent for business premises or payment for a business telephone line for example.

If you incur pre-trading capital expenditure, on computers or a van for example, you can introduce those into the business at the lower of their value or cost as if the expenditure was incurred on the first day of trading. Read about capital allowances here and here.

At the end of your first period of trading, you draw up your accounts to determine your profit or loss and, if you are operating as a sole trader, you disclose those figures in your self-assessment tax return. The revenue expenditure you have incurred is simply claimed as expenditure against income of the business. You claim capital allowances to write off your capital expenditure either in one go under the annual investment allowance rules or over a period of years under the writing down allowance rules. To make life easier, I would recommend you draw up your accounts to 31 March or 5 April to coincide with the end of the tax year. The HMRC helpsheet HS222 here is a good guide on calculating your profit or loss.

If you have a loss in the first four years of trading, you can choose to offset this against other income for up to three tax years earlier. Alternatively, you can claim it against other income of the same tax year, the previous tax year or carry it forward for offset against future trading profits from the same business. Take a look at the HMRC helpsheet HS227 here for information on how trading losses can be claimed.

If you operate your business through a limited company, you cannot offset trading losses against your personal income.

I hope this helps but let me know if you have any further questions.

Customer: replied 3 years ago.
My consultancy business starts now.
Can I offset the expenditure for office equipment advertising and marketing against tax I have paid through PAYE I have paid during 2014 to date? If I put in all my expences for 2014-15 will I get a rebate?

All the best,

Expert:  TonyTax replied 3 years ago.
If you make a trading loss in the 2014/15 tax year which will be your first year of trading, you can if you wish to claim tax relief for it against your income of 2013/14 which is when you appear to have paid over £100,000 in tax.

As I said in my previous post, the losses in the first four years of trading can be tax relieved against income of the three previous tax years so you may have several opportunities to claim back some of your 2013/14 tax.

If you make a profit even after deducting your revenue and your capital expenditure, then you won't have any loss to use against 2014/15.
Expert:  TonyTax replied 3 years ago.
Hi again.

It's been a few days since I answered your question. Is there anything you need further clarification on?