Tax tips for small businesses and start-ups


Setting up in business is an exciting prospect. Once you’ve made the decision to take the plunge, there’s a minefield to negotiate with regard to a whole host of business decisions, from whether to work from home or business premises, whether to employ or use freelance help and the all-important funding source.

One of the issues we find emerging businesses struggling with is tax and accounting and knowing how to keep adequate books, what can and can’t be claimed for and how their business structure affects this.

Ensure you’re claiming the right amount – many small businesses fall into the trap of claiming too much on areas such as use of home as business, motoring expenses or food and drink.

Working from home – When it comes to using a home office, only the cost of ‘running’ that room in terms of utilities can be claimed for – not fixed expenses such as rent or mortgage, or home insurance/maintenance. HMRC states that a ‘reasonable’ method of calculation be applied, so a good way to calculate is to divide the heating and electricity bill between the amount of rooms in the house to get an idea of the usage for the rooms you use for business. For an even more accurate result, work out floor space of your home and calculate the cost per square metre, then use the figure as the basis to work out the percentage of your home used for business.

Motoring expenses – When it comes to motoring, the stated amounts per mile from HMRC include maintenance and other costs associated with running a car, so these can’t be claimed for separately.

Eating and drinking – the rules on this differ dependent on whether you run a limited company or operate as a sole trader. For limited company owners, food and drink consumed whilst out on business can be claimed, although for sole traders the rules are stricter. Unless the sole trader has to stay away from home overnight on business, or the journey is of an unusual nature, claiming for food and drink is not allowed.

There is guidance on the above on the HMRC website, but of course, seeking help from a good accountant at the outset will stand any business in good stead in the start-up phase – helping them get off to the best start.