The rules for allowable business expenses are generally similar for limited and unlimited companies, with some subtle exceptions. Where there are differences  – these are identified in the guide below.

General expenses (or Sundry Expenses)

  • General expenses is a catch all account for those expenses that don’t seem to fit any other expense account in your profit and loss.
  • Used sparingly, this is a handy account to have to code small costs too. An overused general expenses account can disguise or dilute the true costs of running your business. They could also ‘hide’ costs such as fines and charges that need to be disallowed form your tax calculations at the year end.  Avoid where possible.

Top Tips: We recommend that this account is used as a last resort. As management accountants we firmly believe the more expenses code the better (within reason!). The the better you track your costs in your accounts; the easier they are to plan, manage and control.

Gifts From the employer to the employee:

  • Gifts under £50 (per tax year) are consider trivial and are not classed as a benefit in kind.
  • Gifts with a cumulative value exceeding £50 (per tax year) are considered a benefit in kind and are taxed accordingly.
  • Employee gifts are allowable expenses.

To clients or suppliers:

  • Gifts are generally not allowable as a deduction against the company’s profits, i.e. they are treated much the same as business entertaining. Unless they are branded or trivial – under £50.
  • Gifts to anyone outside your business with a value under £50 per year is an allowed expense.
  • Food, drink, tobacco or vouchers of any value are disallowed and treated in the same way as Business Entertainment
  • Unbranded gifts with a value exceeding £50 are disallowed and treated in the same way as Business Entertainment

Third party gifts to the employee:

  • Goodwill gifts (such as a bottle of wine from the employer’s client) can be received by an employee without an income tax charge where all of the following conditions are met:- the cost to the donor is less than £250 (including the cumulative cost of all gifts within the same tax year); – the gift is the goods themselves, or a voucher to acquire goods; – the donor is not connected to the employer, or anyone connected with the employer ; and – the gift is unsolicited and not given in return for the employee’s service.
  • If these conditions are not met , the third party must provide the employee with information about the amount of the benefit, which the employee should then include as assessable income on a tax return. The third party may instead prefer to enter into a taxed award scheme which includes payment of the related tax.

Top Tips It would be sensible to keep a gifts register and ensure all staff notify you of any gifts they received from a third party connected with your business.

We hope you find this series on expenses helpful. Please take a moment to check out our other articles.              

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