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bigduckontax, Accountant
Category: Tax
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Hi Tony

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Tony Tax does not appear to have picked this up and I am the second expert to have had a look. Perhaps you could be so kind as to tell me what your question actually is? With this information I may be able to assist you with your problem.

Customer: replied 2 years ago.

I set up my limited company 2 years ago

I work in financial services and I place my clients into a big company who asked me to go limited to pay me

This is working fine.

I used to work for a network on a self employed basis and I carry responsibility for advice given whilst I was there. The advice was always to my own clients

The network have had to pay on a complaint and I have had to pay the PI Insurance excess of £10,000

As this expense was related to my clients who now belong to my limited company, I am wanting to claim the PI excess payment against my tax (the limited company tax) and the limited company will pay the invoice - I am 100% shareholder / director. My limited company is the same name as me but with financial services on the end.

my accountant says that as the claim comes from before the limited company was set up then it does not qualify as an expense for the company.

My argument is that as the company is concerned with advising those same clients and in the same business that when the clients were moved to the limited company then i also moved responsibility for past advice.

The claim comes from nearly 10 years ago and I have had 2 jobs in the meantime

can my present company take responsibility for past advice for me personally concerning existing clients

My initial reaction was that this would not be possible and indeed this gem from Stewart Accouting Services Chartered Accountants confirms this and provides the following:

'Pre Startup Incorporation Expenses

Reclaiming expenses

According to Section 61 of the Corporation Tax Act 2009 (CTA 2009), assuming any pre-trading expenses are legitimate, “the expenses are treated as if they were incurred on the start date (and therefore a deduction is allowed for them).”

Expenses can be claimed for up to 7 years before a company starts up in business.

Therefore any expenses incurred wholly and exclusively in the course of setting up the business for which the company was later formed can be reclaimed.

Typical pre-formation expenses include: internet and domain name fees, computer equipment and software, accountancy and other professional fees, and travel costs.'

Regretably for you, what your accountant has told you is correct as you are out of time by some three years.

I am so sorry to have to rain on your parade. You would have had to put this expense through your self employment account which is now probably closed. You could put the belated claim before HMRC with the hope that that Dpartment might allow you to reopen a very old tax year, well out of time, but I suspect that they will not play ball. However, they might agree, in these unusual circumstances, to the sums being allowed against the company, but don't bet on it! I would suggest that you ask, after all HMRC can only say 'No,' in the worst case scenario. Of course, do this in writing, much too important to rely on verbal communications in such a complex issue.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

thank you for your reply.

I should explain that the original sale took place 10 years ago, not the claim for payment.

The claim for payment was first made in 2012, and indeed a new invoice for payment was raised for this only this year after I agreed to pay.

I ceased trading for the network in december 2007 when I last had self-employed earnings.

does this alter your advice?

Yes, I understood that, but the claim was in respect of the 10 year old sale. I would have thought that the Limitation Act, 1980s would protect you from a claim over six years old and you should have rejected it on its inception. I suggest that this is, in fact, the case now and the calimant can go hang.
Customer: replied 2 years ago.

Ok I understand

it is not the client claim it is my contract with the network. that has forced payment. In financial services there is no long stop in place any many advisers go into late retirement still carrying baggage.

I was first made aware of the claim within 6 years anyway it is just the time for sorting out the fallout.

Thanks for your assistance

I understand, what a pity I thought it might be out of time, but it appears it just slithered in under the wire.

Please be so kind as to rate me before you leave the Just Answer site.

Thank you for your support.