What can be claimed for business use?
When preparing my clients tax returns I often get asked or come across a situation where my client has either put down expenses for business use that are disallowed for tax purposes or worse still they omit claims that they should be putting down to minimise their tax bills.
There are three main ways that a business can operate (Sole Trader, Partnership and Ltd Company) and they form in which a business operates can also affect the way an expense is treat for tax purposes.
An example of this being that a sole trader paying themselves a salary is not tax deductible whereas a Ltd Company with a sole director paying their director a salary can be a tax deductible expense for the Ltd Company.
For this short blog I will focus mainly on Sole Traders and Self Assessment tax returns but many of the expenses listed below can be set against the income for other forms of businesses to reduce their tax liabilities.
Once a year a self assessment tax return is prepared, checked and submitted to HMRC for sole traders and within these returns are details of income and the expenses for the business.
One important thing to remember is that a business expense must be wholly and exclusively for business use in order for it to be claimed for tax purposes. The exception to this rule would be a non-commercial vehicle (i.e car) as this would be blocked as an tax deductible expense but if they are legitimately for business purposes then they can be written off over time using capital allowances.
With Covid-19 affecting the way people work, there has been a huge number of individuals who work from home. By doing so, they are entitled to claim a weekly allowance (currently £6 per week) to offset against their profits as an expense. If the amount of expenses by working from home would work out more than £6 per week then the household expenses can be apportioned in order to claim the amount used for business use.
There are many expenses that can be used for both business and personal use, an example being the purchase of a laptop, and when claiming the expenses for these only the business usage element can be claimed. So if you use the laptop for 60% Personal and 40% business then only 40% of the purchase price could be claimed as an expense.
Mobile phones are currently one of the few expenses where the personal use element doesn't matter and the full 100% can be claimed.
There are many other expenses that can be claimed and each of them are essentially specific to the business that is being carried out, e.g. safety equipment for a construction worker or a industrial printer for a printing company, etc.
To find out more about what can be legitimately claimed as a business expense for your business contact us at email@example.com or call us on 0191 5111217.