Expenses are one of the main perks that make the daily stresses of running your own business worth it.
There are plenty of allowances you can claim against your business to reduce your tax bill.
But just as you should know what you can claim for, it is equally important that you don’t get caught out by claims you can’t make.
HMRC has a long list of allowable expenses. Ultimately you can only put through expenses that are wholly for business use and related activities. As soon as items are used on a personal basis you could begin to lose out.
We reveal five expenses you can’t claim for.
HMRC will let drivers claim a mileage allowance if using a private vehicle for business.
This is 45p per mile for the first 10,000 miles in a year and then 25 p per mile above that.
But this is only if you are going out on business and can’t be used for travelling to and from work on a regular basis.
Travel and subsistence rules may let you claim for your journey if you are contracting somewhere, but this only applies if you are working in the same place for less than 24 months.
If you are travelling to the same location for work over more than 24 months then HMRC will treat you as an employee and you won’t be able to use the subsistence rules.
Lunch in Paris on a Friday afternoon sounds good and could be a great place to hold a business meeting.
You could even come to the location of our sunny offices in Brighton to iron out your business strategy by the beach.
If the trip is solely for business purposes then it could be claimed as a travel expense. But if you then decide to spend the weekend in Brighton with the family you would lose any relief as the trip would be deemed as personal.
Looking the part is an important element for business. But in most cases this will need to come out of your own pocket.
There are some industries where you can claim for the cost of clothing and equipment.
For example, tradesmen such as builders and doormen or those working with precious metals can claim for the cost of buying, repairing or replacing small tools as well as for cleaning, repairing or replacing specialist clothing.
But if you are just looking for a new suit you can’t claim the costs.
HMRC has a list of professions that can claim for clothing.
Putting lunch on the company card can be tempting, but you can actually only expense it if you are entertaining your own staff.
You can only claim tax relief and VAT if the purpose of the event is to entertain employees. But if any clients turn up and join in this is no longer an allowable expense.
So you can’t expense a client lunch, even if you only talk about work for the whole time.
It is even more tricky if you don’t employ any staff and where it is just you and another director.
You can only expense food and drink if you were away from your usual place of work on a temporary basis, such as on a business trip.
You can reclaim tax you pay on fees or subscriptions to some approved professional organisations - but only if you must have membership to do your job or it’s helpful for your work.
It is important to check HMRC’s approved list of professional organisations.
For example, journalists can’t expense membership of the National Union of Journalists, while lettings agents can for membership of the Association of Residential Lettings Agents.
In these cases you could argue that the journalist doesn’t need to be an NUJ member to do their job whole being part of ARLA gives a lettings agent respectability and professionalism.
The best way to claim the right expense is to make use of a decent accountant.
If you want advice on how to claim for the right expenses and minimise tax, give us a call today. We are London accountants offering a full range of tax and accountancy services, from VAT returns to financial planning, and payroll to tax-efficient investment advice.