We have worked with both start-ups and established businesses in the creative industry for over 10 years. Our wealth of knowledge in creative industry business tax allows start ups to access all of the exclusive tax breaks they are entitled to, that will enable them comfortably make it through their first year.
New Creative Industry Start Up Venture
Cash flow is often the make or break factor of any business. Prompt invoicing and good credit control are essential to you businesses success and survival.
There are a number of tax reliefs that exist to support companies that are just starting out.
Pre-Trading Expenditure Relief
Many creative industry entrepreneurs spend years preparing for their businesses launch- buying equipment, such as camera equipment, bit by bit. Whether the purchases were consciously towards your launch or an unconscious contribution towards your unforeseen business, the expenditure is often claimable.
Pre-trading expenditure can be deducted from the turnover of your businesses first accounting period- as if it has been incurred during the first year of trading.
Please note there are some items that do not qualify as a claimable pre-trade expense, such as capital expenses.
Whether you need to register for VAT is likely to be an early consideration. There are a number of compulsory registration requirements that may well mean that you do not have an option.
If you are likely to be incurring work-related expenses on a regular basis we often recommend you register for VAT from the get go. For instance, if you are a filmmaker and are going to have to upgrade your camera and editing equipment regularly.
If you have decided to register for VAT, you should first consider whether any work related VAT has occurred prior to registration. Pre-registration input VAT may be reclaimed on goods acquired within four years of the effective registration date (EDR), provided the goods are still in use at the EDR, and for services within six months.
If you register for VAT after beginning trade, it is important to ensure the optimum date for recovery of the maximum pre-registration input tax. For voluntary registration, the EDR can be backdated to upto four years.
Early year Losses
It is perfectly normal to make slight losses within your first year of business. To aid start-up losses, the normal one-year carry back facility is extended to the three years preceding the loss. This extension applies to losses incurred in the first four years of trade.
This can be extremely useful for entrepreneurs who were previously employed, as sideways loss claims can lead to a tax refund- providing a cash injection for the your business.
Sideways loss Relief
In order to claim sideways loss relief you will need to prepare your accounts and tax return on the accruals basis. The HMRC will deny relief if it determined that the trade is not being pursued on a commercial basis, i.e. it’s actually a hobby.