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Posted Sat, 19 Aug 2023 14:09:26 GMT by Zu Ko
Good Afternoon, I am a sole trader and purchased van and other equipment to be used in my business from my personal bank account before my business bank account has been opened. In order to record these costs in my accounting software, I will need to record these as out-of-pocket expenses. However, I do not require them to be reimbursed back to me. Will there be any issue with them staying forever outstanding? Or should I reimburse them back to me after few years once my business generates enough cash to cover the initial costs instead of taking money out of the business as Drawings in the future? Is there any rule that expenses owed to the owner have to always be reimbursed (if yes, is there a timeline/deadline) or is it acceptable to keep them outstanding in the system for years/forever? Thank you very much in advance for your reply!
Posted Thu, 24 Aug 2023 05:25:42 GMT by HMRC Admin 25
Hi Zu Ko,
Pre-trading expenses are expenses that you incur before you start your business.
You can claim them as tax-deductible if they meet the following conditions:
The expenses were incurred within seven years of you starting to trade.
The expenses would have been tax-deductible if you had incurred them while you were trading
You treat them as if they were incurred on your first day of trading.
You have receipts and paperwork to support the claim.                                                                                                                                                                                                                                     Further guidance is here:
Expenses if you're self-employed
Thank you. 
Posted Thu, 24 Aug 2023 18:40:07 GMT by Zu Ko
Hello, Thank you for your reply! I have incurred the expenses after I have started trading but paid for them from personal bank account as I was still in process of opening my business account. My question was not about if I can claim them as I know I can and have all the receipts etc. The question was whether I can have the out-of-pocket expenses outstanding for years in my books without reimbursing them. Or whether there is a timeline by when expenses have to be reimbursed? Thank you.
Posted Sat, 26 Aug 2023 12:13:04 GMT by Bella Boo
Hi, I'm not a HMRC Admin but I am an accountant. There is no reimbursement possible if you are a sole trader. You and the business are one and the same. So if you incurred the expense (wholly and exclusively for the purposes of the trade of course, I don't mean your personal expenditure) then the business incurred the expense. There is nothing to pay back, because you and the business are one and the same. Any pay back you receive will be in the form of profits. Profits are taxable on you, irrespective of whether you withdraw all the profit from the business account or whether you leave it in there. It's a good idea to keep business and personal finances separated for cash flow management. But any money moved from personal to business account or the reverse is akin to you moving some money to a savings account and some in a current account. It's all yours.
Posted Thu, 31 Aug 2023 06:21:09 GMT by HMRC Admin 25
Hi Zu Ko,
The guidance at BIM46351 advises that 'relief in respect of certain expenditure of a revenue nature incurred for the purposes of a trade, profession or vocation before it is commenced, provided the expenditure is incurred within a period of seven years prior to the commencement of the trade, profession or vocation, and is not allowable as a deduction in computing the profits of the trade, profession or vocation but would have been so allowable if incurred after the trade had commenced'.
The 'wholly and exclusively' rules still apply as advised at BIM37000:
BIM37000 - Wholly and exclusively: contents
Thank you. 

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