Tax Allowable Expenses

What expenses are tax allowable remains the most common questions posed to accountants, yet is one of the hardest to answer. So just what are Tax Allowable Expenses?

A definitive list is impossible to produce because an expense may be allowable for one business but not allowable for another, depending on their type of trade and exactly what the expense relates to.

To make matters worse, the HMRC rules are different for limited companies, employees and sole trader/partners, so a type of expense allowable for a limited company may not be allowable for a sole trader or vice versa.

Then we have the pleasure of “duality” to deal with, i.e. where an expense has dual benefit to both the “business” and the “person”, such as clothing, gym membership, home telephone, etc., which may be allowable, not allowable or partly allowable, depending on the exact circumstances and the nature of the trade.

If you’re operating as a limited company, an expense may be allowable for the company, but could land you with a horrendous personal taxable benefit in kind tax charge, eg a company car and fuel.

As always with tax, the devil is in the detail.

Our friends over at FreeAgent online accounting have drafted a couple of really useful guidance booklets which are essential reading for anyone in business, either as a sole trader/partner or trading via their own limited company:-

Can I claim it – sole traders and partnerships

Can I claim it – limited companies