Most founders spend real money long before the company earns anything — laptops, software, travel to meet suppliers, a designer for the brand. Good news: much of it is claimable. Better news: some of the VAT is too. The catch: only if you can evidence it.
The seven-year rule
Expenses incurred up to 7 years before trading starts are treated as incurred on day one of trading, provided they'd have been allowable then: equipment, software, professional fees, market research travel, domain names, insurance. They reduce your first year's taxable profit like any other cost.
Doesn't count: the cost of incorporation itself (capital, not trading), training that gives you a brand-new skill (versus updating an existing one), and anything with meaningful private use unapportioned.
The VAT bonus
Once VAT-registered, reclaim VAT on goods bought up to 4 years back (still owned and used in the business) and services up to 6 months back. On a founder's typical pre-launch spend — laptop, phone, software, legal fees — that's routinely a four-figure reclaim. Our VAT guide covers the timing strategy.
Personally-paid costs
Spent your own money before the company existed? Normal. Once trading, the company reimburses you for legitimate business costs (or credits your director's loan account — the good direction of that account). Keep it clean: real receipts, a simple log, reimbursed amounts matching evidence.
Do this today
- Make a folder (or a FreeAgent inbox) and photograph every receipt you can find — bank statements help reconstruct what's missing.
- List: date, supplier, amount, what it was for.
- Note which items you still own (that's your VAT reclaim list).
- Hand the lot to your accountant with your incorporation date.
Fifteen minutes of archaeology, often several hundred pounds back. It's also the moment the habit starts: from now on, everything gets captured as it happens — which is why every one of our packages includes FreeAgent, where snapping a receipt takes three seconds.
