We all know when you’re in charge of a business, you’re also in charge of your own taxes. Ultimately how much you pay comes down to what you say on your return. Whereas the majority of business owners play by the rules, and won’t abuse the opportunity to pay less than they owe, there’s always someone who will. Often these people believe they can stretch the boundaries of HMRC’s criteria and it will pass by unnoticed.
We’ve been in the industry long enough to know when it comes to business expenses, it’s best to stay well clear of two things in particular. Hearsay and interpretation. Here’s why.
When it comes to tax, there’s only one person you should have eyes for. Your accountant.
You may have heard of someone legitimately charging something to their business because their accountant said they could. Now, when you do hear about those instances, it’s usually an extraordinary item, like a car, and often comes with a version of: “can you believe it!”
Firstly, if it does sound too good to be true, it likely is. Four words apply here: big pinch of salt.
Secondly, yes, there will be someone somewhere who can legitimately expense a whole car, but that claim will comply with strict parameters from HMRC and will be exceptionally rare. Unless your business falls under the exact same conditions, it’s likely you won’t be able to expense the same items. It’s different for everyone.
There’s always the chance it could be a legitimate claim for you, but run it by your accountant and if it is: win, win! Whatever happens, don’t fall into the trap of thinking if they did it, you can too. It’s a real gamble and just not worth making.
In our blog, “Here’s what you can expense to your business” we break down exactly what you can expense (and the eligibility criteria to do so). If you’re looking for definitive guidance you can trust, that’s a great place to start.
When it comes to egregious business expenses, we’re a big “hell no”.
OK, here’s why we’ll never bend the rules for any of our clients.
People often assume if they did test the boundaries of HMRC’s compliance checks, they’d be the only ones at risk of penalty or legal action. Actually, if someone is found to have deliberately misled HMRC, it kicks off an investigation that could impact the business owner, their accountant and all of their accountant’s clients.
The ramifications can be huge and it makes sense. If an accountant puts their name and qualifications alongside a questionable return, HMRC would be right to assume they’d be willing to do it for the rest of their clients. It means they will look at a catalogue of returns filed by the same accountant to see that everything lines up.
It risks real reputational harm and it’s why we just won’t sign off on a return we don’t fully stand behind. Integrity is a value we believe all accountants should hold on to tightly. If they do, you’ve found yourself a good one.
Here’s a list of what you can’t expense to your business.
Now, we gave you a list of things you definitely can expense (and good news, it’s much longer than this one!). Here’s a list of what you can’t.
As always, we recommend double checking with your accountant but by and large, the following is applicable to most businesses. If you’re still not sure, please ask us, we know these rules inside out! We’ll keep you compliant and we’ll make sure you’re only paying the tax you owe. Nothing more.
Clothing expenses
Business attire is disallowable but specialist clothing in some trades and uniforms can be deductible.
Dividends
Any dividends are taken from your company after corporation tax is paid from the remaining retained profits meaning their ineligible as a legitimate expense.
Entertainment expenses
With certain, very limited exceptions, expenditure on business entertainment or gifts won’t be allowable as a deduction against profits, even if it is a genuine expense of your trade or business.
Any expenses with a personal advantage
If you receive any personal benefit from an item, it’s highly unlikely you will be able to claim it as a business expense. If you’re unsure, definitely check this one with your accountant.
Parking fines and speeding tickets
Even if you were on a business trip when you incurred these, these are not allowable expenses. This includes fines for unpaid Congestion Charges.