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.

Office furniture

  • Your office chair, desk and cupboards are likely to be capital purchases  – they can be capitalised to your balance sheet as fixed assets and depreciated over their estimated useful lives.

Operating Leases

  • Lease or buy is sometimes a difficult decision, lease costs are an allowable expense for corporation tax and great for cash flow allowing you to spread your repayments over time.
  • If you are cash rich and can buy your asset, you still might consider leasing if you have used your annual investment allowance for the year – it will take you some years to benefit from the capital investment of new equipment, thereby leasing an asset gives you tax relief sooner.
  • An operating lease  usually involves the lessee paying a rental for the hire of an asset for a period of time. Operating lease payments are recognised as an expense over the lease term and are fully allowable for tax purposes.
  • An operating lease might be for office rental, machine or vehicle hire.
  • Do check the paperwork for your operating lease carefully, these often include VAT which can be recovered if you are VAT registered. Operating lease providers often provide a an annual VAT schedule rather than monthly VAT invoices. Make sure you have the right documentation in place to support your VAT claim.

More about leases – Can I capitalise my lease or not?

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

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