A-Z Expenses

What expenses are you allowed to claim when running your business? What are the tax implications?

For tax purposes HMRC allows you to claim most but not all direct expenses incurred in the running of your business. There are two ‘tests’ to consider:

  • The ‘Wholly and Exclusively’ test – The expenses must be wholly and exclusively incurred for the purpose of the business.
  • The ‘Duality of Purpose’ test – people must eat to survive and they must wear clothes to preserve their dignity and stay warm – which means that generally clothing and food are not an allowable expense UNLESS, the expense meets the ‘Wholly and Exclusively’ test.

Disallowed expenses – there are some expenses that may be paid for by the business, but are disallowed or added back when it comes to calculating the end of year tax liabilities such as fines and business entertainment. Good Housekeeping – what ever the expense, do keep a proper record:

  • invoices, receipts – evidence of the spend to prove that it’s legitimate and allows you to claim the VAT back if you are VAT registered
  • credit card slips – to track which account the expenses was paid from (helpful if you have many!)
  • mileage records – don’t fall into the trap of estimating or guessing. If you don’t keep adequate records HMRC could disallow your claim.

Sounds complicated – it can be! The guide below is a high level overview of the types of expense that can be claimed as a business expenses when preparing your company accounts. There are grey area’s depending on your business circumstances so if you do have a query, please do contact us [email protected]

Expenses by letter:

A is for…
  • accommodation
  • accountancy fees
  • advertising
B is for…
  • bank charges
  • business gifts
C is for…
  • charitable donations
  • childcare vouchers
  • Christmas parties
  • cleaning
  • clothing
  • commuting
  • Companies House fees
  • company formation fees
  • computer equipment
  • consultancy
D is for…
  • deposits
  • depreciation
  • directors remuneration
E is for…
  • entertainment
  • eyesight tests & glasses
F is for…
  • fines
G is for…
  • general expenses
  • gifts
H is for…
  • hotels and accommodation
I is for…
  • insurance
L is for…
  • long service awards
  • lunch
M is for…
  • medical check ups
  • medical insurance
  • mileage claims
  • mobile phones
  • motorbike & bicycles
N is for…
  • networking
O is for…
  • office furniture

Keep checking back as we post more business expense articles to complete the series. Leave a comment below if you would like us to add an article or comment about a particular expense. We hope you find this series on expenses helpful. Please take a moment to check out our other articles.

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