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It’s tax time… are your expenses in order?

As we’re coming up to Jan 31st, I thought it a great time to feature this article from Amy Taylor about expenses, admitedly a very dry topic, but still one worth featuring as it is so relevant to many of us!

Expenses incurred for the self-employed business must be “wholly and exclusively” for the purposes of the trade. It is a difficult area and much of what is allowable or not relies on case law. I have listed below five of the most common areas where clients question whether an expense is allowed:

1. Entertaining. Any expenses you incur entertaining your customers or suppliers is disallowed and should be added back to your profits. If you are entertaining your staff, for example a Christmas party, you are allowed to claim £150 per head per annum, and this will not be treated as a perk for the employee.

2. Gifts. Gifts to customers and suppliers are not allowable unless they promote your services and are worth less than £50. The promotion should be prominent and conspicuously displayed on the gift.

3. Work clothes. Generally disallowed on the basis that they have a dual purpose, for example the need to be warm and dress well, as well as the specific business need.

4. Food whilst away from home. If you are just out and about on work-related errands or business, food is disallowed as HMRC takes the view that you have to eat and drink as a basic human need, and the fact that you didn’t bring your own food from home doesn’t mean you can claim for it while you are out. Different rules apply if you are staying away from home, and some overnight subsistence expenses may be allowed.

5. Any items with private use. If you claim for your phone line rental, broadband, motor expenses, any other basic costs, make sure you only claim for the business proportion. Keep a log of usage and deduct personal use from the total cost before you make the claim.

If you are not sure whether an expense is allowable or not, ring your local tax office and they should be able to put you through to a technician who can help you. Or you can ring your accountant for advice. Failing all of that, or if you are not 100% sure, put a comment in the space at the end of your self-assessment form to say you have claimed it, and why you think it is allowable. This way you are taking responsibility for your actions and letting HMRC know about the expense in advance of any random or other enquiry they may conduct in future.

Good claiming! For more information on accounting and tax services from Amy Taylor Accountancy, please ring me on 01767 260282 or email me at amy@tayloraccountancy.net. Visit my website at www.tayloraccountancy.net.

Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date. However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy (or Women Unlimited for that matter!)

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