Starting a small business + expenses

Hi,
Hopefully I have posted this in the right forum, feel free to move it if not.

Basically I am looking to start my own online retail business in the next couple of years and my plan was to spend the next year or so investing heavily in stock, whilst still employed so I eventually have enough inventory just to up and leave.

My question is, would I register for self assessment whilst making purchases and essentially writing everything off against my personal allowance (if possible)? My only reservation with that, is I technically wouldn't be trading as I would only be buying in the first year and not selling.

Or, do I invest heavily in stock for a year or two, record all expenses and then when I do decide to start trading, add all them expenses to my first tax year of trading?

I would be looking to work as a sole-trader on a cash-basis accounting.

Any advice would be welcome.

Thanks

Replies

  • edited 18 June 2020 at 7:27PM
    sliphisliphi Forumite
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    edited 18 June 2020 at 7:27PM
    Jak1211 said:
    Hi,
    Hopefully I have posted this in the right forum, feel free to move it if not.

    Basically I am looking to start my own online retail business in the next couple of years and my plan was to spend the next year or so investing heavily in stock, whilst still employed so I eventually have enough inventory just to up and leave.

    My question is, would I register for self assessment whilst making purchases and essentially writing everything off against my personal allowance (if possible)? My only reservation with that, is I technically wouldn't be trading as I would only be buying in the first year and not selling.

    Or, do I invest heavily in stock for a year or two, record all expenses and then when I do decide to start trading, add all them expenses to my first tax year of trading?

    I would be looking to work as a sole-trader on a cash-basis accounting.

    Any advice would be welcome.

    Thanks
    I won't express any opinion here about investing heavily in stock before trading other than to say that will be your decision hopefully based in the large part on your business plan.

    But to answer your question, anything you purchase within the 7 years before you start trading that would normally be classed as an expense if you were trading, can be treated as an expense on your first day of trading.

    You cannot offset the expenses before you start trading as you are not trading, so they cannot be trading expenses at the time.
    Nor can you offset them against tax you are paying, perhaps though PAYE etc.
    Think about it. If you could, we would all do that, and then decide not to ever start trading.

    Edit: See also the thread you asked 12 months ago asking essentially the same thing
    https://forums.moneysavingexpert.com/discussion/6009721/buying-and-selling-writing-off-against-tax

  • PennywisePennywise Forumite
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    And on cash accounting, you can't set any losses you make against your employment income, i.e. if you started the business mid way through the tax year and had a few months of employment and a few months of self employment.  Cash basis requires losses to be carried forward to set against the first available future trading profits of the same trade.  You maybe better off on the accruals basis if you are likely to have losses as you can claim a tax refund from tax taken on your wages prior to starting to trade.
  • martindowmartindow Forumite
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    Can you not start selling from the start even if on a small scale?  Starting to develop a customer base and a reputation while allowing your web site to be picked up on google will stand you in good stead for the future.  It will also allow you to test the market to see if this is viable for a full time business.
    Putting up a web site does not mean the sales will automatically come pouring in.  A lot of businesses start small and take a lot of effort driving traffic to the site.
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