| Type of expense | Deductible expenses | Not 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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