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27/05/19 15:22

What IS an allowable Business Expense?

So often, we as accountants are asked by clients what type of expenses incurred are allowable against business profits for tax. The starting definition is that you can claim for any cost incurred "wholly and exclusively for business" and those are important words. Wholly and exclusively. That clearly means that an expense containing a private use element - motoring costs, phone costs - need to be reduced to the business element. And it also excludes entirely any expenditure with no business purpose - for example, travel on holiday, tickets for entertainment, private rent on a home.

There is no exhaustive list provided by HMRC as to what constitutes a wholly and exclusively business expense, but common sense should be applied, and the outline list we suggest would at least include the following;

Goods for re-sale or use in the work, production and operation of the business

Consumables, tools, equipment, computers, commercial vehicles, motor cars (if used for business)

Business motoring fuel - fuel for business with a supporting log of business mileage travelled

An apportioned amount of all other motor expenses relevant to your business activity

Premises costs for business premises, including local taxes, rates, heat light and power

Business insurances

Business travel (flights, bus, train) and business subsistence (hotels, accommodation)

Stationary. postage and office costs

Advertising and promotion costs

Business telephone and internet costs

Protective clothing for your business

Courses, seminars, training, certificates

Professional fees of your accountant, consultants on projects, legal costs on business

Use of home as office - if you use your home for your business, you can claim a portion of your home domestic bills - light, heat, phone, internet, rates, rent - but you have to demonstrate a calculation of the basis of the apportionment (if you have an office, it's the office room size relevant to the entire house floor size multiplied by an itemised list of these costs)

There are more costs, of course, because the nature and overhead costs of businesses differs widely. Please consult us if you would like us to review your business, the overhead costs you incur and those others you may not have included before... and let's see if they qualify.

Call us on 02844 616413 for further information

What IS an allowable Business Expense?

Written by: Norman Elliott FCA
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