When it comes to working out what counts as a legitimate business expense for tax purposes, it’s not worth trying it on.
For example, don’t ever be tempted to put a family holiday through as a business expense, even if you had a business meeting during the holiday, or visited a supplier.
Were your family with you? Did you stay longer than strictly necessary for the meeting? Did you spend any time on the beach? HMRC looks out for this kind of thing and won’t be impressed.
So how do expenses work?
There are certain kinds of expenses that will affect you, your family, and your business differently.
Allowable business expenses are anything you’ve purchased, whether that’s a product or service, that helps run your business.
For example, stationery, phone bills and legitimate business travel costs are all applicable. You won’t pay tax on these items, as they’ll be deducted when you calculate your taxable profit.
So here lies the danger – it’s tempting to put trips through this process, especially if you can think of a way that you might have been working, despite taking a holiday.
In our view, this simply isn’t worth the risk. You’re setting yourself up for investigation, and if you don’t have a long daisy chain of receipts to properly back up your claim (it’s not a work trip if you’ve booked an Airbnb with a kid’s room) then you could find HMRC knocking at your door.
Revenue expenses are the regular and more commonly incurred business costs in an accounting year. They’re normally short term purchases, used on regular upkeep or the general running of your business.
Anything that lasts a long time, such as new technology or equipment, is known as capital expenses. Capital expenditure qualifies for tax relief known as capital allowances.
What’s not a claimable expense?
It’s one thing running a charge through the business – but it’s another trying to claim back tax on it.
There’s nothing to stop you from taking the office out for lunch, or even a team bonding trip to the Amazon rainforest (if you’ve got the cash) but trying to claim back tax on it is against the law.
If there’s a personal aspect to anything that you’re claiming, you could run a serious risk of investigation.
And it’s not just a trip out or team lunches that you need to be wary of – any loans that were taken out to help the business or fines incurred by a member of the director’s board, or a charitable donation, can’t be claimed on either.
If you’re unsure about an expense, you need to have a trusted adviser who can let you know that what you’re doing is in fact legal.
That’s where we come in.
Let’s talk about taxable expenses
Tax is a massive headache to report on, understand in full, and manage for your business. That’s why you don’t want to cause yourself extra stress by trying to claim for something that you really shouldn’t.
If you need advice, support, or just a helping hand, give us a call today and we’ll talk through everything you need to know about business expenses.