Certain pre-trading expenses of a trade or profession are allowable in calculating the trading income of that trade or profession once it commences pursuant to Section 82 TCA 1997.
Section 82 deduction
Under Section 82, a deduction is available in respect of pre-trading expenses which:
- are incurred in the three years prior to commencement of the trade or profession, and
- would not be allowable but would have been allowable if they had been incurred after the date of commencement of the trade or profession.
Accordingly, the provisions of Section 81 apply for the purposes of calculating the deduction. For example, only pre-trading expenses which were wholly and exclusively laid out or expended for the purposes of the trade or profession are allowable.
For the purposes of allowing the deduction, the allowable amounts are treated as having been incurred at the time the trade or profession commences. Allowable amounts are not available for set-off against income other than income from the trade or profession. Where the allowance creates a loss, relief in respect of the part of the loss attributable to the pre-trading expenditure will be by way of carry forward against future profits of the trade or profession.
Expenses
According to Revenue examples of pre-trading expenses are:
- accountancy fees,
- advertising costs,
- costs of feasibility studies,
- costs of preparing business plans, and
- rent paid for the premises from which the trade or profession operates.
Pre-trading expenses incurred by another company
Where a company incurred pre-trading expenditure and another company commenced the trade, the company that commenced the trade may claim relief for that expenditure to the extent that it is not used by the company that incurred it.