Question

Say I have purchased assets (a computer) or paying for a service (online accountancy software), but haven't yet incorporated as a limited company. Is it possible to then attach these costs/assets to a company after incorporation as company expenses and have the company compensate me as an individual for the costs, and additionally would the company (if VAT registered) be eligible to reclaim the VAT on such items/assets?

Answer 1

I'm not an accountant but i did exactly this when i incorporated in 1998. I was just told to keep receipts and so on.

When the company was set up i claimed back.

I think it's got to be within a reasonable timescale.

Still, if you are a small business you may want to look at the small business VAT schema where you pay 13% but don't claim anything back.

Answer 2

I'll prefix this with: I am not an accountant, and I don't even play one on TV.

We reclaimed stuff that we bought prior to the company's formation -- I think technically, I put them through as a personal expense claim when the company was formed, then stuck it on the director's loan account until the company was able to pay the debt back.

As for reclaiming VAT, I believe that the following is the case:

• you can reclaim consumables and services that were purchased up to 6 months prior to registering for VAT.

• The VAT on any assets can be recovered up to three prior to registering for VAT.

When we first registered, we got a cheque from the Inland Revenue for ~£4K, which was nice. :) On the other hand, it's been nothing but a bloody nuisance ever since!

Steven mentions the Flat Rate Scheme for VAT. If you are mostly a services company and don't purchase much in the way of hardware or software, you'll probably benefit from this scheme (at least in terms of pain in submitting VAT returns).