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Commencement of trade

The determination of the date of commencement of trading is important in several respects. In general, relief for revenue expenditure incurred wholly and exclusively for the purpose of the trade before the commencement of trading is treated as allowable on the day the trade commences, provided it is incurred in the seven years before the commencement of trade¹.

Relief for capital expenditure incurred before commencement of trading is obtained by deeming it to be incurred on the first day of trading².

A person that is solely involved in oil exploration activities is not necessarily regarded as trading for UK tax purposes. The date of commencement of trading is a question of fact determined under long established principles, see B1.401. However, HMRC usually accept that a petroliferous trade commences as soon as a decision is taken to proceed with the commercial development of a discovery that will lead to production. This is generally regarded as no earlier than the end of Stage