As a business owner you are in a position to claim back the cost of a number of expenses from HMRC. Basically this applies to the costs of running a business, which you are allowed to deduct from the income your business has produced, when working out your profits. You can submit a claim as part of your tax return.
The Revenue allows you to claim for ‘allowable expenses’. These are what you pay out in the course of generating revenue. These strictly apply to business expenses and so unfortunately you are unable to claim for non-business or personal items.
The most common expenses you can claim for include:
Professional fees: This covers accountants, lawyers and architects’ fees. However legal costs related to buying large items such as property are excluded, as are costs associated with settling tax disputes and fines.
Insurance: Must be related to the business and excludes recoverable costs.
Advertising: Including newspapers, Internet, business website costs, mailshots and samples.
Transaction fees: Including business banking (e.g. bank overdraft charges), merchant fees (e.g. PayPal and credit card charges), hire purchase interest and leasing payments. However loan repayments are excluded, as are overdraft repayments. In other words, the interest is included but not the principal.
Interest on business loans: Similar to transaction fees, interest paid on business loans is allowable as an expense, but you cannot claim for repayment of the principal.
Car, van and travel expenses: Including insurance, repairs, fuel, parking, vehicle licence fees, AA/RAC membership, travel tickets (train, air, bus and taxi), hotel rooms and overnight business meals. To be allowable, an expense must be for business use and so this excludes the cost of a vehicle that is purchased privately, as well as travel between home and the place of business.
Rent, rates and utilities: Including rent for the business premises, water rates, light, heat, power, property insurance and security. Only the business part of a premises can be considered for the purposes of an expense claim and you cannot claim for the actual cost of buying the premises. Where a home office is being used you can only claim for the business percentage of the costs of running your home (heat and light etc.).
Phone, Internet, stationery and postage: This also covers the costs of faxes, printing, small office equipment and computer software. This could be a good excuse to upgrade!
Professional subscriptions: This includes membership subscriptions and also subscriptions to trade and professional journals.
Wages and other staff costs: It is legitimate to claim for salaries, wages, bonuses, pensions and benefits for staff. In addition, a business can claim for staff uniforms and equipment such as helmets and safety shoes. Also allowable are agency fees, subcontracted labour costs and employers’ NICs. However a business owner cannot claim for their own wages or drawings, or for pension contributions or NICs.
Cost of goods: The cost of any goods bought for re-sale by the business is an allowable expense, as are the cost of raw materials used and the direct cost of producing the goods. Conversely, items or materials bought for private use are excluded, as is depreciation.
Other points to note:
Entertainment costs are non-allowable as an expense unfortunately. This includes costs incurred with clients, suppliers and customers. Best save the bubbly for the family.
If you are VAT registered you must deduct the VAT from the expense when making a claim, whereas if you are not VAT registered you can claim for the total amount spent on the expense.
Time to claim:
It is worth bearing in mind that you can claim expenses for both the current tax year and previous tax years – up to four years in many cases. However, expense claims must be for the tax year that they are used. So, if you pay for a year’s professional membership you can only claim for the period in the specific tax year of your return.
