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Tax Deductible Expenses PDF Print E-mail
What expenses are tax deductible?

Type of expense    Deductible  expensesNot deductible 

Normal business expenses generally

Expenditure incurred wholly and exclusively in the course of business

Personal expenditure including client entertaining. Staff entertainment is allowable

Capital items (i.e. items expected to be used for more than 1 year)

An annual capital allowance is available on most items of equipment

Freeholds and long leaseholds of most non-industrial premises

Computer software

If bought separately from hardware and the software is expected to have a useful economic life of less than two years and does not have a sufficiently enduring nature, the expenditure is revenue otherwise it is treated as plant

Generally, computer software is plant and therefore qualifies for capital allowances

Gifts to customers

Gifts costing up to £50 and contain a conspicuous advertisement for the business. Examples are diaries, pens, etc.

The gift is food, drink or tobacco, or a token or voucher exchangeable for goods

Use of home as office

Reasonable proportion of home running expenses, depending on the extent of use of home for business. These may include building insurance, council tax, mortgage interest, rent, repairs and maintenance ,etc HMRC manual - BIM47820

Domestic expenses not related to the business

Telephone bills

Business proportion based on calls and a proportion of line rental

Private element and a proportion of home line rental

Motor expenses

Business proportion based on mileage.
If the car is owned by the director, running costs such as repairs, insurance, tax disc, cannot be claimed by a Limited Company. Director submits a claim based on business mileage

Private element of motor running costs

Travel expenses

Business travel

Travel between home and normal place of business

Subscriptions

Professional subscriptions to professional bodies approved by HMRC
 

Clubs, charities and items not associated with the business
 

Wages and salaries
 

Staff (including family where duties genuinely carried out)
 

Proprietor's own drawings and gratuitous wages to family

Bank charges and interest
 

Charges on business accounts and overdraft interest
 

Interest for personal overdrafts and loans
 

Loan interest
 

Interest on business loans and loans from directors
 

Interest on income tax paid late and interest paid to sole proprietors
 

Insurance
 

Business related policies including, Employer’s liability, premises insurance etc
 

General provisions and debts written off voluntarily
 

Bad debts
 

Specific bad debts from unrelated parties
 

General provisions and debts written off voluntarily
 

Accountancy fees
 

Fees for normal business activities
 

Costs of unsuccessfully defending an Inland Revenue investigation
 

Legal fees
 

Most business related advice
 

Partnership agreements, company formation, property acquisition and renewing long leases
 

Personal expenditure
 

Modest subsistence expenses in certain cases when working away from normal place of business

Lunches, private expenses and bills, gifts, clothing (unless a uniform)
 

Director and Staff Pension contributions
 

Pensions paid by the company on behalf of directors and staff
 

Pensions paid for third parties e.g. directors’ spouse
 

Credit card interest
 

Interest on company credit card
 

Interest on a personal credit card
 
Entertainment Staff entertainment - BIM45033 Customer entertainment 

Parking
 

Parking permits are allowable
 

Parking fines are not deductible
 

Congestion charge

If the car is owned by the limited company, the charges are deductible by the company
 

If the car is not owned by the Limited company, the charges are not deductible - might give rise benefit in kind
 

Clothing
 

Protective clothing or uniform for certain trades 
 

Generally not deductible
 

Training courses
 

If they upgrade an existing skill
 

If they
give business proprietors new expertise, knowledge or skills, which they lack they are not allowable
 
   

 

 
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