What can be claimed against tax?

It’s the time of year when many small businesses and self employed individuals are beginning to complete their tax return. The process can be long and difficult, particularly when it comes to understanding expenses. The rules regarding what can be expensed are ambiguous and complicated, often depending entirely on individual circumstance. For this reason many people struggle – claiming something which isn’t allowable can cause additional investigations into your circumstances by HMRC, however noone wants to lose out.

It’s important to remember that you can only get tax relief for allowable expenses, and not all expenses are allowable. Allowable expenses are costs to a business or company which are ‘incurred wholly and exclusively for the purposes of trade.’  Examples of allowable expenses include but are not limited to:

  • Equipment required for the business – for example styling tools for a hairdressing business, coffee machines for cafes or tills for a shop
  • Replacement parts for any equipment or machinery
  • Professional insurance for your premises or equipment
  • Accountancy fees
  • Advertising or marketing costs
  • Printing or stationary costs
  • Postage costs, particularly for e-commerce businesses
  • Staff wages
  • Cleaning costs

However this list is not set in stone. Certain expenses can be dependent on circumstance, and an expense that one business would be able to claim would not be allowable for another. For example, travel costs. Many small business owners or self employed individuals will use their own car for business purposes. In this situation, the rate at which the business milage can be claimed can change year by year, as decided by the budget, and should therefore be researched thoroughly beforehand to be aware of the current rate. Additionally, it is important to note that if you are claiming business mileage, you are not allowed to also claim fuel expenses or motor repairs. Ultimately, the best way to be certain if and how you are able to claim for any expenses is to contact your accountant.

Nevertheless, there are some things that you can do to make claiming easier and cut down on accountancy costs. The first is to always keep full and proper records – this includes outgoing costs and income received. Receipts and invoices should be organised efficiently, along with bank statement, cheque book stubs, paying in books, records of mileage and loan statements. This will not only make your tax return far easier to complete but could also save you hassle further down the road. HMRC are able to request evidence at any time should there be any problems with your tax return, so having everything on hand will prevent any difficulties should you be contacted. Maintain records for a minimum of six years is also required by law, and penalties can be issued for failing to do so.

Of course, your chartered accountant will be able to help you every step of the way. MCC provide a variety of financial services to small businesses including bookkeeping services, company management, tax returns and cash flow management. We understand the pressures of running your own business and can help reduce your financial burden not just when your tax return is due but all year round. To speak to a member of our team, contact us on 0161 707 1500 or use our enquiry form to send a message.

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