Expenses is a very large area of tax, and one of the most challenging as well, which is why we’ve written this blog post; to try and give you an idea of some of the expenses that you can claim.
An expense is allowable as long as it was reasonably incurred, and exclusively incurred for the purpose of the business, or it was spent for the purpose of the business. It also has to be either relevant to the assessment period, or spent in the assessment period. To be allowable, it must not be excluded by regulations (see below).
The decision maker should always consider each item of expense separately.
Regulations around Tax Deductible Business (Or Self Employed) Expenses
The regulation specifically say that some expenses are not to be allowed in the calculation of normal weekly earnings. These are:
a) Capital expenditure
b) Repayments of capital on loans taken out for business purposes
c) Depreciation of capital assets
d) Sums used, or intended to be used, in setting up or expanding a business
e) Losses incurred before the beginning of the assessment period
f) Expenses incurred in providing business entertainment.
These are the official guidelines as published by HMRC. It is absolutely essential that you speak to your professional advisor before you allow or disallow any business expenses. Feel free to call us on 0800 612 2008.As long as the conditions in the first paragraph are met, these are the day-to-day expenses of a business you can allow:
- Accountancy charges
- Cleaning of business premises
- Difference between opening and closing stock (on accounts)
- Employees wages before any deductions are made, including any wages payable to the domestic partner
- Employer’s contributions to employees’ pension scheme
- Employer’s (secondary) Class 1 SS contributions
- Heating and lighting
- Hire or rental costs (but not any capital or purchase elements)
- Interest payable under a credit sale, a consumer credit agreement or a hire purchase agreement (but not the capital element of payments)
- Legal fees associated with the business
- Payment in kind for work done for the business – the monetary value is allowable
- Rent and Rates
- Stock purchases
- Sundries, sometimes called miscellaneous items, which are small in relation to total allowable expenses provided that the decision make is satisfied that no non-allowable expenses, for example for business entertainment, are included
- Telephone, telex, fax etc (Only the proportion that is used for business, i.e. if you use your telephone 30% for business, 70% for personal, then you can claim 30% of the bill as an allowable expense)
- Transport excluding any home-to-work costs
- VAT allowable (2)
(2) The decision maker should allow VAT as an expense of the business where a) the amount of VAT paid to C&E during the assessment period is greater than b) the amount of VAT received from C&E in the same period. The expense is the amount by which a) exceeds b).
Obviously, tax deductible business expenses is a huge area of tax; far too big to cover in a single blog post, so if you need to know more about expenses, take us up on our FREE 1 Hour Consultation, in which we can go through, and if necessary, start implementing some of the allowable expenses!