What expenses are tax deductible? Be in-the-know

Adams Moore dispels myths around what expenses are tax deductible, giving advice on areas such as travel, business equipment and entertaining.
One of the major considerations for start-ups when it comes to running a business is knowing what expenses are tax deductible. There are many myths and misconceptions around this area, and getting it right from the start will save a headache later on and ensure tax relief on relevant items is maximised.

Business clothing and travel

These are some of the main areas of confusion for business owners when it comes to knowing what expenses are tax deductible. Many believe they can buy a business suit and offset that expense against business profit. However, even in cases where an outfit is used wholly for business meetings, the expense can be paid from the business account but will not be tax deductible. The exception here is in the case of a work uniform, clothing featuring the company logo or safety clothing (safety boots, for example). When it comes to travel, any travel made in the course of running a business including to and from meetings and necessary hotel stays come under those expenses that are tax deductible. However, travel from home to a workplace is not. When travelling for work, a ‘reasonable’ amount for breakfast and an evening meal can be expensed, but only if the trip is an overnight one. Business vehicles (purchase or lease), repairs, insurance and breakdown cover are also expenses that can be claimed for.

Professional services fees

Fees for accountancy services are tax deductible, but not those relating to assistance with personal tax returns. Fees such as legal fees, or those incurred by other professional services such as a surveyor or an architect, can also be offset against the company profits, if the service is wholly employed for the business. Bank charges are included too, again, as long as the bank or credit card/loan is a business account.

Entertaining

It might make you want to choke on your petit pois to learn that taking a client out for lunch or dinner isn’t tax deductible. Even when solely entertaining a client or prospect – which can only be for the purposes of the business – this sadly isn’t an allowable expense. Again, it can be paid for from the business account. When entertaining staff, such as a Christmas event or some other annual celebratory get-together, the expenses incurred are tax deductible, but only if all staff members are invited and the expense is less than £150 per head.

Office equipment

Items such as business stationery, printer cartridges and postage all come under allowable expenses. Equipment such as printers, computers, furniture are classed as fixed assets or capital expenditure, and are also tax deductible, but have to be claimed as a ‘capital allowance’, up to a maximum of £25,000 per year.

There is a variety of information available for start-ups and small businesses around what expenses are tax deductible, but using a qualified accountant will ensure that all claimable expenses are included, and may help identify some that aren’t, to maximise tax savings. Anyone who would like advice on business expenses should contact us on 01827 54944.