Regarding 'Pre-Trading Expenses' for a Sole-Trader

ykc08

Hi,

I'm in the process of setting up a business and the initial run-of-the mill expenses such as Web Design/Logo/RBN/Hosting/Domain/Business Address are going to pile up quite a while before I'm even considering thinking of expecting revenue.

So my question is how are these 'Pre-trade' expenses going to be handled by Revenue. Will they be carried over to the next year or can I claim a tax refund for the year the costs were incurred. My quite realistic projections indicate that I may not get much of any business for the first couple of years so I want to know how to handle a negative balance with regards to returns and such.

I'd greatly appreciate any light shed on this situation.

Victor

I get the impression that you need to consider you trading separate from your income as an employee or capital gains (I think there is another few categories also).

So, if you make a loss in the first year, you can carry forward those losses until you make a profit and set the losses against the profit.

So if in the first year you lose €5,000, you pay no tax. If in the second year, you make a profit of €8,000, you only pay tax on the €3,000 (€8,000-€5,000). If you were also an employee (of another business) in the first year, you can't off-set the loss against the tax paid on that income.

dbran

Victor wrote: »

So if in the first year you lose €5,000, you pay no tax. If in the second year, you make a profit of €8,000, you only pay tax on the €3,000 (€8,000-€5,000). If you were also an employee (of another business) in the first year, you can't off-set the loss against the tax paid on that income.

Yes u can. It is only losses carried forward that such a restriction applies but losses can be set off against other income in the year that they are incurred.

Dbran

Mongarra

Pre-trading expenses incurred for the purposes of the trade or profession are allowed as an expense. They are treated as having been incurred on the first day of trading. However if a loss arises in the first year's trading the pre-trading expenses included in creating the loss will not be allowed for set-off against other income of the year (for example your own or spouse's employment income - assuming, if you are married, that you are assessed jointly) or carried forward for set-off against future profits.

Other expenses incurred after trading commences will be available for set-off or carry forward.

Here's hoping there is a profit and you will not have to worry about segregating the pre-trading expenses from other running expenses.

dbran

I stand corrected