Can I claim expenses for business research and planning?

Can I claim expenses for business research and planning?

When you’re building a business idea, it’s normal to spend money before you ever make a sale. You might pay for market research reports, travel to meet potential suppliers, test advertising, buy books or online courses, subscribe to industry tools, or hire someone to help you write a business plan. The big question is whether those “getting ready” costs can be claimed as business expenses for tax purposes.

The answer is often “yes, but it depends,” because the tax treatment of research and planning costs usually turns on a few key themes: whether you were already trading at the time you spent the money, whether the costs are revenue (day-to-day running costs) or capital (creating or acquiring a long-term asset), and whether the expense is genuinely incurred “wholly and exclusively” for business purposes. Different business structures also have slightly different rules and practicalities, and there are special issues where expenses occur before the business formally starts.

This article explains how research and planning expenses are commonly treated, the difference between pre-trading and post-trading costs, which costs are more likely to be allowable, and how to document and claim them in a way that stands up to scrutiny. It’s written to help you think clearly about the categories and the evidence you’ll want to keep, whether you’re a sole trader, a partnership, or running a limited company.

What counts as “business research and planning”?

Business research and planning covers a broad range of activities. In practical terms, it includes anything you do to test whether an idea is viable, understand the market, and map out how you will operate. Examples include:

• Paying for market research reports or industry data subscriptions.

• Survey tools and incentives for respondents to take part in your research.

• Travel and accommodation for meetings with potential customers, suppliers, or partners.

• Prototype testing and validation activities (depending on what’s produced and how).

• Fees to consultants who help you assess feasibility, pricing, or go-to-market plans.

• Legal or professional advice connected to choosing a structure, setting up operations, or drafting a plan (though legal costs can be tricky and sometimes capital).

• Branding discovery work, domain searches, competitor analysis, and early marketing tests.

• Software subscriptions used for research, planning, forecasting, or collaboration.

Some of these costs are straightforward running expenses once you’re actively trading. The complexity usually arises when you spend money before you officially start trading, or when the spending creates something enduring (a long-term asset) rather than supporting normal day-to-day operations.

The key test: are you “trading” yet?

In most tax systems, the concept of when you start “trading” (or commence business activity) is central. Research and planning can happen in a grey zone: you can be actively working on the business without yet providing goods or services to customers. Whether you can claim the costs depends on how the rules treat pre-trading expenditure and on whether the costs relate to a trade that actually starts.

In practical terms, many tax authorities distinguish between:

• Pre-trading costs: incurred before the business begins trading.

• Trading costs: incurred after the business begins trading.

Research and planning costs often fall into the first bucket. If the rules in your jurisdiction allow pre-trading expenses to be treated as incurred on the first day of trading (sometimes within a permitted time window), then many research and planning expenses may become claimable. If your jurisdiction is stricter, you may only claim from the point trading begins, making earlier costs non-deductible unless they qualify under a special allowance or capital treatment.

The tricky part is pinning down when trading starts. It’s not always the day you register a business or incorporate a company. It’s often the day you begin to offer goods or services, start fulfilling contracts, or otherwise carry on the activity in a commercial way. Planning, researching, and preparing typically come before trading. But certain preparatory steps can also be part of trading in some contexts, especially if you begin marketing and accepting orders, even if you haven’t delivered yet.

Revenue vs capital: why the “type” of expense matters

A second crucial distinction is whether an expense is “revenue” (often deductible against profits) or “capital” (usually not immediately deductible, but potentially claimed through depreciation, amortisation, capital allowances, or cost basis on disposal). Research and planning costs can be either, depending on what they relate to and what they produce.

Revenue expenses are the ordinary, recurring costs of running a business: subscriptions, minor tools, stationery, typical travel, and services that support operations. If research and planning is more like due diligence and ongoing market awareness while running the business, it tends to look like revenue expenditure.

Capital expenses are costs that create, improve, or acquire a long-term asset or an enduring benefit. For example, paying to acquire a business, buying a patent, or developing a major new system that will serve you for years could be capital. Some feasibility and investigation costs can also become capital if they are directly linked to acquiring or creating an asset.

The difference matters because you might be allowed to claim revenue expenses more directly (subject to rules), while capital costs often have to be claimed differently. Also, pre-trading revenue expenses are sometimes treated more generously than pre-trading capital expenses, depending on local rules.

The “wholly and exclusively” (business purpose) principle

A common standard is that an expense must be incurred wholly and exclusively for the purposes of the trade (or business). Research and planning expenses can fail this test if they are partly personal. For example, traveling to “research” a market while also taking a holiday can raise red flags. Similarly, paying for general education that is as much about personal development as it is about the business can be challenged.

This doesn’t mean mixed-purpose costs can never be claimed, but it usually means you need a defensible allocation. For example, if you travel to a trade show for business reasons but also extend the trip privately, you may claim the business portion if it’s properly separated, with clear evidence of business schedules, invoices, and dates. The more you can demonstrate a clear business motive and keep personal spending separate, the easier it is to support a claim.

Commonly claimable research and planning costs

Here are categories of research and planning expenses that are often claimable (either as trading expenses or as allowable pre-trading expenses treated as incurred at the start of trade), provided they are genuinely for the business and supported by records.

Market research and industry data

Subscriptions to industry publications, paid reports, access to databases, and survey tools are frequently claimable when they are used to understand customer needs, competitor positioning, pricing, or distribution channels. If you are already operating, these costs typically look like normal revenue expenditure. If you are not yet trading, they may still be treated as allowable pre-trading costs in many regimes, especially if they are closely connected to the eventual trade.

Be mindful of “enduring benefit” arguments. A one-off, expensive report that forms the foundation of a long-term strategy can still often be revenue, but if it’s part of acquiring an asset or a business, it may be considered capital. Context matters.

Professional advice and consultancy

Paying consultants to assess feasibility, develop pricing models, or map operational processes can be claimable, but you should watch out for services that relate to acquiring a capital asset or setting up the structure in a way that is treated as capital. For example, due diligence related to buying an existing business, or legal work to acquire intellectual property, may be capital in nature.

A useful habit is to ask consultants to describe their work clearly on invoices. “Market research and commercial feasibility assessment” reads differently from “advice on acquisition of business assets.” The substance of the work is what matters, but good invoice wording helps show purpose.

Travel and subsistence for research meetings

Reasonable travel costs for meetings with suppliers, potential customers, trade shows, or site visits are often claimable, as long as the trip is primarily for business. Keep diaries, agendas, event tickets, and emails setting up meetings. If a trip has a mixed purpose, be careful to claim only the business portion and be able to explain how you calculated it.

Subsistence (meals) is a common area of scrutiny. In many places, meals can be claimed when they are necessarily incurred because you are traveling for business. But ordinary meals near home, or meals that are essentially personal, are usually not claimable. Keeping receipts and noting the business reason for the travel is crucial.

Software, tools, and subscriptions used for planning

Project management tools, accounting software, forecasting templates, design and prototyping tools, and collaboration platforms can be claimable if they are used for the business. If a subscription starts pre-trading, it may still be claimable as a pre-trading expense if permitted. If you also use the subscription personally, you may need to apportion the cost or choose a separate business plan/account.

Initial advertising tests and lead generation experiments

Early marketing often looks like planning, but it can also be part of actively starting a trade. Small-scale advertising tests, landing pages, email marketing software, and promotional material can be claimable if the intent is to generate business. The key is that the spending is connected to an actual or intended trade, rather than just general curiosity.

However, major brand creation projects can sometimes veer toward capital treatment if they create a lasting intangible asset. Many regimes still treat typical marketing as revenue, but it’s worth being cautious when the spend is large and the outputs are enduring.

Costs that are often not immediately deductible (or can be restricted)

Some research and planning expenses are more likely to be challenged, restricted, or treated differently. This doesn’t automatically mean you can’t claim them; it means you need to think carefully about classification and evidence.

Costs of acquiring a business or major assets

If your “research” is really due diligence for purchasing a business, a property, or a significant asset, those costs may be capital. That can include valuation fees, legal fees connected to acquisition, and certain investigation costs. Often these are added to the cost of the asset for capital gains calculations or claimed through capital allowances depending on the asset type and local rules.

Training and education

Training is a frequent point of confusion. Training that updates or improves an existing skill used in an ongoing business can be more likely to be deductible. Training that gives you a new skill or qualifies you for a new trade can be treated as non-deductible, particularly if it’s seen as personal development or establishing a new capability rather than maintaining an existing one.

For business research and planning, this matters because many founders take courses while preparing. If the course is closely tied to your existing trade and clearly for business operations, it’s easier to support. If it’s a broad “how to start a business” program that benefits you personally regardless of whether the business starts, the claim can be harder to defend. Documentation helps, but substance is key.

Entertaining and hospitality

Meeting people to discuss an idea often involves coffee, meals, or events. In many jurisdictions, business entertaining has limited deductibility or is disallowed entirely, even if it seems business-related. It’s important not to assume a business meeting automatically makes the meal deductible. Some systems allow staff subsistence during travel but disallow client entertainment; others treat both differently. If you’re unsure, take a conservative approach and keep clear records distinguishing travel subsistence from entertainment.

Personal expenses dressed up as research

It’s tempting to treat personal spending as “research,” especially when starting out. But tax authorities are used to this. Common examples include upgrading a personal phone “for business,” traveling somewhere nice “to study the market,” or buying a laptop that’s also used heavily for personal reasons. The safest route is to maintain separate business accounts, separate devices where possible, and careful usage records or reasonable apportionment where separation isn’t practical.

Pre-trading expenses: how they’re commonly handled

Pre-trading expenses are those incurred before the business starts trading. Research and planning costs often fall into this category: you’re exploring a concept, building a plan, and preparing to launch. Many tax regimes allow certain pre-trading revenue expenses to be treated as if they were incurred on the first day of trade. This means that when you do start trading, you can claim those earlier expenses in the first tax period, subject to conditions.

Common conditions include:

• The expenses would have been deductible if incurred after trading began.

• The expenses are incurred within a specific period before trading starts (often a set number of years).

• The expenses relate to the same trade that actually begins, not a different idea that was abandoned.

This last point is important. If you researched three different business ideas but only pursued one, you may not be able to claim all the exploratory costs, especially where they don’t relate to the trade you ultimately start. Some regimes allow a broader approach, but a good discipline is to link costs to the final business activity and keep notes explaining what was decided and why.

What if the business never starts?

A tough situation arises when you spend money researching and planning, but you ultimately decide not to proceed. In many cases, if no trade begins, you may not be able to claim those costs as trading expenses because there is no trade to attach them to. Some jurisdictions have limited reliefs for certain aborted projects, but often the default is that without a trade, there’s no trading deduction.

This is one reason it can be valuable to keep careful records of timelines and decisions. If you later start a business that is substantially the same as what you researched, you may be able to connect some costs to that trade. If you pivot to an entirely different activity, the earlier costs may be harder to claim.

Sole trader vs limited company: does structure affect the claim?

Your business structure can change how research and planning costs are claimed and how strictly they are evaluated. The principles of business purpose, revenue vs capital, and timing still apply, but the mechanics differ.

Sole traders and partnerships

If you operate as a sole trader or partnership, business expenses usually flow through to your personal tax return (or partnership return, with allocations). If pre-trading expenses are permitted, they may be treated as incurred at the start of the trade and claimed against early profits. Keeping separate business accounts is still highly advisable, even if it’s not legally required, because it makes the evidence clearer.

One practical issue is that pre-trading costs may be paid from personal accounts. That’s not inherently disqualifying, but you should keep receipts and ideally record those costs in your bookkeeping as being introduced into the business (for example, as owner’s capital introduced) and then recognized as expenses where allowable.

Limited companies

With a limited company, the company is a separate legal person. That means expenses must generally be incurred by the company to be claimed by the company. If you personally paid for research costs before the company existed, you can’t automatically treat them as company expenses. However, there are common approaches where, once the company exists, it reimburses you or you invoice the company for qualifying expenses, provided the arrangement is properly documented and the expenses are genuinely for the company’s business.

Companies also have more formalities: board approvals, expense policies, and clearer boundaries between personal and corporate spending. If research and planning costs were incurred in anticipation of the company’s trade, it’s essential to keep a clear paper trail showing that the spending was for the company’s intended business, and that reimbursement is handled correctly.

Another company-specific issue is that some startup and development spending may be treated as intangible asset creation, potentially capitalized in accounts. Accounting treatment is not always the same as tax treatment, but it can influence how you approach classification and documentation.

How to decide if your research and planning cost is deductible

When you’re unsure, use a structured set of questions. This doesn’t replace professional advice, but it helps you think like an auditor and classify spending consistently.

1) Was the expense incurred for the business (and only the business)?

If the expense has a substantial personal element, be cautious. If you can separate the business part, do so and keep evidence. If you can’t separate it, the whole cost may be disallowed.

2) Did the expense relate to a trade that actually started?

Costs tied to an idea you abandoned may not be claimable as trading expenses. Costs tied to the business that eventually started are more defensible, especially if incurred within an allowable pre-trading window.

3) Is the expense revenue or capital?

If it creates a long-term asset or is directly linked to acquiring an asset, it may be capital. If it supports ordinary operations (even if early-stage), it’s more likely revenue.

4) Is it incurred before or after trading started?

If it’s after trading begins, it’s often more straightforward. If it’s before, check whether pre-trading rules apply and whether the cost would have been deductible had it been incurred after start.

5) Can you prove it?

Receipts, invoices, contracts, emails, meeting notes, and contemporaneous records matter. An expense can be “allowable in theory” but still fail in practice if you can’t substantiate it.

Documentation: what to keep to support your claim

Research and planning expenses are easier to defend when your records show a clear chain: what you did, why you did it, and how it relates to the business. Consider keeping:

• Receipts and invoices showing supplier names, dates, and descriptions.

• Bank and card statements that match the receipts (ideally from a dedicated business account).

• Meeting evidence: calendar invites, emails, agendas, event registrations, trade show tickets, and notes.

• Research outputs: reports, spreadsheets, survey results, competitor analyses, and drafts of the plan.

• Timeline notes documenting key decisions: when you decided to proceed, when you started marketing, when you accepted first orders, and when you delivered.

• Allocation working for mixed-use items: a clear method for apportioning costs, kept consistent.

A simple practice that helps enormously is to write a short note on each receipt or in your bookkeeping software explaining the business purpose, especially for travel, meals, and online purchases where descriptions are vague.

Apportionment: handling mixed business and personal use

Some expenses are genuinely mixed, especially early on. Internet, phone, home office costs, and general software can be used both personally and for business. Where the rules allow apportionment, you should apply a reasonable method and keep a record of how you arrived at it.

Examples of reasonable approaches include:

• Pro-rating phone or internet by estimated business usage percentage, supported by usage patterns.

• Apportioning travel where a trip includes a private extension, claiming only the days and costs tied to business activity.

• Separating subscription tiers or accounts (one personal, one business) where possible, reducing the need for allocation.

The goal is to be consistent and conservative. Overly aggressive allocations can create risk. If the business use is minor, it may not be worth claiming at all.

Common scenarios and how they’re usually treated

Let’s walk through a few real-world situations and how they often play out. These are general illustrations; local rules matter.

Scenario: you buy a market research report before launching

You pay for an industry report that helps you decide pricing and positioning. If you later start the business, this is often treated as a deductible expense (possibly as a pre-trading expense) because it supports commercial decision-making and doesn’t itself create a separable asset. Keep the report invoice and a note on how you used it.

Scenario: you travel to meet a supplier and also take a weekend break

You fly to another city to meet a supplier on Friday, then stay until Monday for leisure. A common approach is to claim the business-related travel and accommodation for the business days, and exclude the leisure days. Flights can be harder: if the flight would have been taken anyway for the business meeting, it may be partly defendable, but some regimes expect allocations when the trip is extended. The safest route is to be able to show that the primary purpose of the trip was business and to separate costs clearly.

Scenario: you pay a designer to create a full brand identity package

Branding costs are often treated as revenue marketing costs, but if the spend is substantial and creates enduring assets (like a suite of brand materials intended to be used for years), some authorities may argue capital treatment. In practice, many small businesses treat typical brand design as revenue. If the cost is large, consider professional guidance and keep documentation showing it was part of launching and promoting trading activities rather than acquiring a separable asset.

Scenario: you commission software development for your planned platform

Bespoke software development is frequently a capital/intangible asset issue. The costs might need to be capitalized and claimed through depreciation/amortisation or other allowances depending on local rules. Early-stage planning costs related to defining requirements could be revenue or capital depending on the project and whether it proceeds.

Scenario: you take an online course on “how to start a business”

This can be contentious. If the course provides general knowledge that helps you personally regardless of the business, it may be seen as non-deductible. If it’s specific training that maintains or updates skills already used in your existing business, it may be more defensible. The more “general life/business skills” it is, the more cautious you should be.

Scenario: you pay for legal advice to set up the business structure

Formation and setup costs can be treated differently depending on jurisdiction and entity type. Some formation costs may be capital, some may have special reliefs, and some may be deductible as revenue. If the legal advice relates to ongoing trading operations (contracts with customers, supplier agreements), it may be more likely to be deductible than costs purely tied to creating the entity or acquiring assets.

When should you start recording expenses?

Start recording from day one, even before you’re sure the business will launch. You don’t want to be sifting through months of bank statements later trying to reconstruct what was business-related. Use a simple system:

• Keep a dedicated folder (digital or physical) for receipts.

• Use accounting software or a spreadsheet to log each expense with date, supplier, amount, category, and business purpose.

• Save PDFs of invoices and screenshots of online receipts.

• Keep a running note of major decisions and milestones.

If you later decide not to proceed, you still benefit from clarity. If you do proceed, you’ll have the evidence ready for claims that may be allowed.

How to claim research and planning expenses in practice

The mechanics of claiming depend on your structure and local filing requirements, but the process is typically similar:

• Categorize each cost (market research, travel, software, professional fees, marketing, etc.).

• Decide whether it is revenue or capital and whether it is pre-trading or trading.

• Apply any necessary apportionment for mixed use.

• Record it in your bookkeeping with a clear narrative.

• Claim it in the appropriate section of your tax return or accounts, following your jurisdiction’s rules.

Where pre-trading expenses are allowed, you typically include them in the first trading period as if incurred on day one. Where some costs are capital, you may need to add them to an asset register and claim through the relevant allowance or depreciation mechanism.

Risk management: how to claim without inviting trouble

Most problems arise from two patterns: claiming personal costs as business, and claiming costs with weak evidence. You can reduce risk with a few habits:

• Use a separate business bank account as early as possible.

• Avoid cash spending for business where receipts are easy to lose.

• Keep contemporaneous notes for travel and meetings.

• Be conservative with meals and entertainment.

• Don’t “round up” allocations; use reasonable proportions and keep them consistent.

• If a cost feels borderline, document your reasoning or seek professional advice.

A good mindset is to assume someone unfamiliar with your business will review your claim. Could they follow the story from receipt to business purpose without needing to guess?

Special note on home office research and planning

Many people research and plan from home before launching. Home office costs can be claimable in many regimes, but they’re frequently subject to specific rules and calculation methods. Some allow simplified flat-rate methods; others require you to apportion actual costs like rent, utilities, and council taxes based on floor area and time used for business.

If your research and planning period is long, you may be tempted to claim home costs before trading begins. Whether that’s permitted depends on pre-trading rules and how home office deductions are treated. Even when permitted, keep in mind that aggressive home office claims can increase scrutiny. A modest, well-documented claim is usually safer than a maximal one that is hard to justify.

R&D vs general business research: don’t mix them up

There’s a difference between “business research” in the everyday sense (market research, competitor analysis, customer discovery) and “research and development” (R&D) as a technical tax concept. R&D regimes, where they exist, often relate to technological or scientific advancement and have specific criteria. If your planning spend includes developing new technology, prototypes, or systematic experimentation, it may fall under an R&D framework with different reliefs, documentation requirements, and definitions.

It’s important not to assume that because you are “doing research,” you automatically qualify for an R&D incentive. Most of what founders call research—customer interviews, market sizing, brand tests—doesn’t fit R&D incentive rules. If you think you might have genuine R&D, consider getting specialist advice and keeping separate records for those activities.

Putting it all together: a practical checklist

If you want a simple way to approach claiming expenses for business research and planning, use this checklist:

• Link each cost to the business. Write a one-line purpose in your records.

• Track dates. Note when you started trading and which costs occurred before and after.

• Classify accurately. Decide whether each cost is revenue or capital.

• Separate personal spending. Use dedicated accounts and avoid mixed receipts.

• Keep evidence. Receipts, invoices, contracts, and meeting documentation.

• Allocate fairly. Apportion mixed costs with a consistent method.

• Be cautious with borderline items. Entertainment, general education, and mixed-purpose travel.

Following this approach won’t just help with tax. It also improves decision-making. When you can see exactly what you’re spending on validation and planning, you can evaluate whether your pre-launch investment is proportionate and where the money is really going.

Final thoughts

Yes, in many cases you can claim expenses for business research and planning—but success depends on timing, classification, and proof. If the spending is genuinely for the business, relates to a trade that actually begins, and is revenue in nature (or properly handled as capital where appropriate), it is often claimable either as a normal business expense or through pre-trading rules that treat it as incurred when trading starts.

When in doubt, focus on substance over labels. A receipt that says “consulting” tells very little; a record that explains “feasibility analysis for pricing and customer segment selection for [your business]” is much stronger. Be disciplined about separating personal and business activity, keep clear documentation, and treat mixed-use spending conservatively. If you’re making significant investments—especially in assets, acquisitions, or software development—professional advice can help you avoid misclassification and ensure you claim what you’re entitled to in the correct way.