What is an allowable business expense?

HM Customs & Revenue (HMRC) allow all businesses to claim allowable expenses against their income. Typically, an allowable business cost is deemed as something which is a critical cost for running your business.

These expenses include:

• legal and financial costs, including business insurances such as public liability, employers' liability and professional indemnity, plus accountant or solicitor fees (if incurred in connection with the business);
• professional fees and subscriptions, but only if your professional body is listed on HMRC's approved professional organisations and learned societies list;
• property costs, including rent, business rates, heat, light and electricity, property insurance etc;
• costs of goods or raw materials which you buy to either sell on or use to create new products to sell;
• employee salaries;
• office costs, covering phone bills, stationery and some office equipment (but not PCs, laptops or office furniture as these are treated as assets on the company's balance sheet);
• advertising and marketing costs, including websites;
• Finance expenses such as the interest on business related loans, bank charges and overdrafts;
• Travel costs, you can claim a mileage allowance of up to 45p per mile for any mileage you do for business purposes (up to the first 10,000 miles, after which the amount you can claim reduces to 25p per mile).

In order to claim allowable business expenses, you must keep records and receipts of all the transactions you wish to claim for.

What expenses am I unable to claim back?

The key to claiming any expense is to ask yourself, is the expense solely to do with my business? If it is, you should be able to claim it. However, where an expense could have a dual purpose, i.e. it is something that you would use personally as well as in your business, you may only be able to claim part of the cost, if anything at all. An example of this would be a mobile phone, where you would have to allocate a percentage of the costs to business use only.

However, there are certain expenses which you cannot claim for in your business, these are:

• Travel costs for getting to and from work, although if you incur costs to go on a legitimate business trip, such as attend a conference, these can be claimed;
• Client entertaining costs, such as corporate hospitality or business lunches or dinners;
• Fines, such as speeding or parking fines, or congestion charges.
• Legal fees connected with the purchase of business premises.

Contact us

Trying to understand what is claimable (or not) as a valid business expense, can be confusing. If you have any questions please don't hesitate to contact us at the Bingley office on: 01274 518200, or at our Ilkley office on: 01943 817045. Alternatively, you can email us at: office@wilkinson-partners.co.uk.