NewLimited Company - zero income - expenses

M

M&M

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Hi
I am setting up a new limited company.
I am still a PAYE worker and intend to continue this for the forseeable future, maybe until one day the new business means I can leave my current job.

In the first year, I am likely to have to do jobs at cost, so no profit.
I may not even get any jobs at all in the first year.
But in that year, I will have a lot of startup costs, such as hardware and all the other allowable expenses.

How will this work out if my revenue is zero and expenses are 5,000.
Can I carry that negative balance over to the following year when hopefully I will have revenue?
Or will I get a refund from the revenue?
Or have I just made a loss?
 
Think twice before setting up a company. there are a lot of costs and required regular returns in maintaining a company. In the long run it may be the way to go, but based on your current position as presented you should consider operating as a sole trader in the short term. You can always register a trading name if you want to operate the business other than in your own name.
 
No. No such thing as a downgrade. very difficult & expensive to liquidate a company.
 
A sole trader can also choose to offset an economic trading loss against PAYE and/or other income for tax purposes, while company losses can only be offset against future company profits.
 
Pre-trading expenses can only be offset against future income from the same trade
 
Thanks for the advice - I think I was trying to run before I could walk with the Limited Co idea - Sole Trader seems the way to go.. I just assumed the tax benefits made it the better option, but with no guaranteed revenue, its probably not the best choice right now.

DB74 - Thanks - So say I pay for these things out of my own pocket now and save the receipts, can I offset them against income I get in a years time (possibly more than a year, but maybe sooner).

The receipts would have dates on them, so maybe that ties them to a specific time period for offsetting, but they would be very clearly business related, nothing is being hidden.
 
I should have said pre-trading losses as opposed to expenses

As T McGibney states above, if you are a sole trader, then you can offset a trading loss against other income earned in the same year of assessment and potentially get a PAYE refund.

The only caveat is that if the losses are classified as "pre-trading" losses then they can only be carried forward to be offset against future profits from the same trade.

The problem with "pre-trading" is that there is no definition of "trading" on the Revenue website so there is no proper way to define "pre-trading"!
 
There may not be a statutory definition of trading or when it commences but in most cases it will be pretty obvious whether the expenditure is is related to trading or "preparing to trade".

A more obvious issue is that the OP refers to start-up costs such as hardware. OP should be aware of the revenue/capital distinction and that a cash loss does not always equate to a tax loss.
 
Maintaining a company could cost at least €500 more per annum than a sole trader. Often you can make up this difference with the tax advantages inherent but you shouldn't incorporate unless you can see the benefits
NumberCruncher
 
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