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Can I reclaim expenses from before my limited company was set up?

Paystream News

Michelle Derungs

Tuesday 22nd Sep, 2015

Having the opportunity to work in the most tax efficient way possible is one of the reasons why contractors who fall outside of IR35 have decided to work as a limited company contractor rather than working through an umbrella company.

However, you may have incurred pre-trading business expenses before you set yourself up as a limited company contractor. The question is, can you reclaim these expenses even after you have set yourself up?

The good news with this is yes you can, providing that the expenses were incurred 'wholly, exclusively and necessarily' in the course of setting yourself up as a contractor. In line with the Corporation Tax Act of 2009 any expenses incurred up to seven years before the incorporation date can be treated as a business expenses.

This means that anything you may have purchased where its intended use was wholly, exclusively and necessarily for the running of your limited company, is liable to be claimed as an expense. This could include:

  • Any equipment purchased (i.e. laptop, work mobile phones)
  • Insurance
  • Stationary
  • Travel costs
  • Domain name registration

It is important to remember these expenses must be for business use only and any training costs incurred prior to setting up your limited company cannot be claimed for. Remember, just like claiming any other expenses, you must have receipts as a proof of purchase.

Finally it's important to bear in mind that yes although you can claim expenses seven years prior to setting up as a limited company, for VAT purposes the limit is only six months.

As a limited company contractor, it is reassuring to know that you can recoup costs incurred prior to setting up your company, whilst also confident in the knowledge that you have taken the most tax efficient route when it comes to contracting.

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