What expenses are allowable in running my business?

Article prepare by Roger Duckworth - Ward Goodman Small Business Specalist

The question we get asked most from our clients when they are running a business is:

‘What expenses am I allowed to claim against my profits?”

While there is no definitive list of expenses that you are allowed to claim the H M Revenue and Customs Guidelines state:

“You can get tax relief for your business expenditure as long as it’s not

• Capital expenditure – on assets such as Vans, furniture and equipment
• Specifically non-allowable – for example entertaining expenditure

But to be allowable expenditure it must be ‘wholly and exclusively’ for carrying on and earning the profits of your business”

The common types of business expenditure are:

• Purchases of goods you sell
• Costs of employing staff
• Costs of running your business premises
• Repairs
• Motor and travel
• Finance costs
• Administration costs – printing, postage and stationery, advertising, telephone, advertising
• Professional fees – accounting and legal fees

The types of expenses that are not allowable are:

• Expenses of a capital nature
• Private expenses – those costs incurred in day to day life
• Entertaining
• Private motoring
• Certain legal fees – fees in respect of a new lease, and in respect of renewing a lease over more than 21 years, or in the purchase of business premises

Although you do not get tax relief on capital expenditure directly against profits you do get an allowances on the capital assets you buy.

Currently the first £50,000 of expenditure on assets is has an Annual Investment Allowance which gives 100% of the asset cost against business profits and for this tax year 2009/2010 there is an additional 40% allowable on the cost of assets that exceeds the initial £50,000.

Exceptions to this include cars and assets used for hire in the business’ trade. These assets attract only a 20% tax allowance.

For more information on this please contact:

Roger Duckworth
01202 875900
07918 745135
roger.duckworth@wardgoodman.co.uk