Company formation as an expense

Discussion in 'UK Accountancy' started by Tim, Mar 5, 2004.

  1. Tim

    Tim Guest

    When a company is initially incorporated at companies house through a
    formation agent, can the cost be offset against tax? If so, what tax?

    Eg:-

    (1) Is the cost of formation an "expense of the company" (which is paid by
    the Ltd Co and) which can be offset against corporation tax?

    (2) Is the cost of formation an "acquisition cost of the shareholders"
    (paid by the shareholders) which can be offset against CGT when the
    shareholder(s) later sell their shares?

    (3) Can it not be offset against tax?

    Many thanks for your thoughts!
     
    Tim, Mar 5, 2004
    #1
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  2. "Tim" <> wrote in message
    news:c29s15$42c$
    >
    > (1) Is the cost of formation an "expense of the company" (which is paid by
    > the Ltd Co and) which can be offset against corporation tax?
    >
    > (2) Is the cost of formation an "acquisition cost of the shareholders"
    > (paid by the shareholders) which can be offset against CGT when the
    > shareholder(s) later sell their shares?
    >
    > (3) Can it not be offset against tax?


    (1) Yes and No.
    (2) No.
    (3) Yes.




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    Troy Steadman, Mar 5, 2004
    #2
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  3. Tim

    Stephen Guest

    Tim

    The cost of formation is a "not allowable" as it is not a trading expense.
    It is usually shown in the p&l account but added back in the tax
    computation.

    I have never seen the cost of formation being offset against CGT. Usually
    the formation cost is shown in the accounts as a non allowable expense
    (which is a debit) the credit is posted to the directors current account,
    they can subsequently take this money back out of the company again.




    "Tim" <> wrote in message
    news:c29s15$42c$...
    > When a company is initially incorporated at companies house through a
    > formation agent, can the cost be offset against tax? If so, what tax?
    >
    > Eg:-
    >
    > (1) Is the cost of formation an "expense of the company" (which is paid

    by
    > the Ltd Co and) which can be offset against corporation tax?
    >
    > (2) Is the cost of formation an "acquisition cost of the shareholders"
    > (paid by the shareholders) which can be offset against CGT when the
    > shareholder(s) later sell their shares?
    >
    > (3) Can it not be offset against tax?
    >
    > Many thanks for your thoughts!
    >
    >
    >
     
    Stephen, Mar 7, 2004
    #3
  4. Tim

    Tim Guest

    > "Tim" wrote
    > > When a company is initially incorporated at
    > > companies house through a formation agent, can
    > > the cost be offset against tax? If so, what tax?
    > >
    > > Eg:-
    > >
    > > (1) Is the cost of formation an "expense of the company"
    > > (which is paid by the Ltd Co and) which can be
    > > offset against corporation tax?
    > >
    > > (2) Is the cost of formation an "acquisition cost
    > > of the shareholders" (paid by the shareholders)
    > > which can be offset against CGT when the
    > > shareholder(s) later sell their shares?
    > >
    > > (3) Can it not be offset against tax?
    > >
    > > Many thanks for your thoughts!

    >
    >

    "Stephen" wrote
    > Tim
    >
    > The cost of formation is a "not allowable" as it is not a
    > trading expense. It is usually shown in the p&l account
    > but added back in the tax computation.
    >
    > I have never seen the cost of formation being offset
    > against CGT. Usually the formation cost is shown in the
    > accounts as a non allowable expense (which is a debit) the
    > credit is posted to the directors current account, they can
    > subsequently take this money back out of the company again.


    Thanks for the reply.

    Just as a matter of interest, what would happen if the formation cost had
    been paid by a *shareholder* who *isn't* also a director? Where would the
    "credit" be posted to offset the "debit"?
     
    Tim, Mar 7, 2004
    #4
  5. Tim

    Stephen Guest

    "Tim" <> wrote in message
    news:c2eolq$acl$...
    > > "Tim" wrote
    > > > When a company is initially incorporated at
    > > > companies house through a formation agent, can
    > > > the cost be offset against tax? If so, what tax?
    > > >
    > > > Eg:-
    > > >
    > > > (1) Is the cost of formation an "expense of the company"
    > > > (which is paid by the Ltd Co and) which can be
    > > > offset against corporation tax?
    > > >
    > > > (2) Is the cost of formation an "acquisition cost
    > > > of the shareholders" (paid by the shareholders)
    > > > which can be offset against CGT when the
    > > > shareholder(s) later sell their shares?
    > > >
    > > > (3) Can it not be offset against tax?
    > > >
    > > > Many thanks for your thoughts!

    > >
    > >

    > "Stephen" wrote
    > > Tim
    > >
    > > The cost of formation is a "not allowable" as it is not a
    > > trading expense. It is usually shown in the p&l account
    > > but added back in the tax computation.
    > >
    > > I have never seen the cost of formation being offset
    > > against CGT. Usually the formation cost is shown in the
    > > accounts as a non allowable expense (which is a debit) the
    > > credit is posted to the directors current account, they can
    > > subsequently take this money back out of the company again.

    >
    > Thanks for the reply.
    >
    > Just as a matter of interest, what would happen if the formation cost had
    > been paid by a *shareholder* who *isn't* also a director? Where would the
    > "credit" be posted to offset the "debit"?
    >


    Tim

    This depends upon the business organisation, the auditor's/accountantant's
    opinion. Usually it will be credited to other creditors, inter-company
    accounts, particapating interests or their may be even a shareholders
    account.
     
    Stephen, Mar 7, 2004
    #5
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