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Business Expenses for Small Businesses
If you run a small business, you’ll already know that claiming expenses can be a time-consuming and complex matter. And, let’s face it, there are a few “grey areas” between what is and is not a legitimate business expense. But you also know that it’s vital that you do claim everything you can that is legitimate in order to maximize the tax-efficient running of your enterprise.
Of course, a good accountant is vital to help advise you and steer you on the straight and narrow. S/he will also be able to advise you what expenses are appropriate for your business and what the current view of HM Revenue and Customs is on different issues.
The reality is that what are “allowable” or “non-allowable” expenses for small businesses can be complicated. To help you, the Inland Revenue has an Expenses and Benefits Tax Guide which clarifies a number of issues.
However, as an overall guide for simplicity, you are allowed to claim as expenses all costs incurred for the purpose of generating business profits. These include things such as business travel (though travel from home to work is not allowed), cleaning costs, utilities, business insurance, postage and office rent. So it follows that you aren’t allowed to claim expenses for costs incurred for non-business activities. In short, according to the law, you can only claim expenses incurred “wholly, exclusively and necessarily” in performing your business duties.
In practice, this throws up some strange but legitimate business expenses. A professional clown would be able to claim for make-up, crazy wigs and costumes, for example.
People running small businesses can also claim “dual purpose” expenses where part of the cost is for the benefit of the business and part for personal use – such as telephone bills or heating costs for a home office etc. Make sure keep accurate records to back up all expense claims you make.
And if you need to raise finance for your small business, seek expert business finance advice.