Understanding Business Expenses

Another tax year is almost over.  Some of you may be completing your first tax return or need to brush up on your knowledge from completing your return last year.  A good starting point may be to review your paperwork and check if your outgoings are classed as a business expense or capital expense.  Below is a comprehensive list of the different types of expenses that are classed as ‘Business Expenses’ for self-assessment.

When reviewing your receipts and invoices, one thing to consider is if you have a bought a piece of equipment such as a van, car, computer etc for use in the business and the ‘useful life’ of that equipment is considered to be longer than 2 years and it is not included in the list of allowable business expenses then it may qualify for Capital Allowance.  For more information on Capital Allowances please follow the link:  http://www.hmrc.gov.uk/capital-allowances/basics.htm

If you are still stumped and not sure where to start please contact me for help.


Allowable Expenses

Non-Allowable Expenses

Accountancy, legal and other professional fees.

Accountants, solicitors, surveyors, architects and other professional indemnity insurance premiums

Legal costs of buying a property and large items of equipment; costs of settling tax disputes and fines for breaking the law

Advertising and business entertainment costs.

Advertising in newspapers, directories etc.  Mailshots, free samples, website costs.

Entertaining clients, suppliers and customers; hospitality at events

Bank, credit card and other financial charges.

Bank, overdraft credit card charges; hire purchase interest and leasing payments.  Alternative finance payments

Repayment of the loans of overdrafts or finance arrangements

Car, Van and travel expenses

Car and an insurance, repairs, servicing, fuel, parking, hire charges, vehicle licence fees, AA/RAC membership; train, bus, air and taxi fares; hotel room costs and meals on overnight business trips.

Non-business motoring costs (private use proportions); fines, costs of buying vehicles, travel costs between home and business; other meals

Communication stationery and other office costs (mobile, internet, email costs).

Phone, mobile, internet, email and fax running costs; postage, stationery, printing and small office equipment costs; computer software.

Non-business or private use proportion of expenses; new phone, fax, computer hardware or other equipment costs.

Construction industry – payments to subcontractors.

Construction industry subcontractor payments (before taking off any tax)

Payments for non-business work.

Cost of goods that you are going to sell or use in providing a service.

Cost of goods bought for resale, cost of raw materials used, direct cost of producing goods.

Cost of goods or materials bought for private use; depreciation of equipment.

Depreciation and loss/profit on a sale of assets.

Depreciation and loss/profit on sale of assets are not allowable expenses – any amount entered here should also be shown in box 43 of the tax return

Depreciation of equipment, cars etc.  Losses on sales of assets (minus any profits on sales).

Insurance policy.

Cost of any business specific policy

Recoverable costs

Interest on bank and other business loans

Interest on bank and other business loans.  Alternative finance payments.

Repayment of the loans or overdrafts or finance arrangements

Irrecoverable debts written off

Amounts included in turnover but unpaid and written off because they will not be removed

Debts not included in turnover; debts relating to fixed assets, general bad debts.

Other business expenses

Trade or professional journals and subscriptions; other sundry business running expenses not included elsewhere

Payments to clubs, charities, political parties etc; non-business part of any expenses; cost of ordinary business clothing.

Rent, rates, power and insurance costs

Rent for business premises, business and water rates, light, heat , power, property insurance, security; use of home as office (business proportion only)

Costs of any non-business part of premises; cost of buying business premises.

Repairs and renewals for property and equipment.

Repairs and maintenance of business premises and equipment; renewals or small tools and items of equipment.

Repairs of non-business parts of the premises or equipment; costs of improving or altering premises and equipment.

Wages, salaries and other staff costs

Salaries, wages, bonuses, pensions, benefits for staff or employees; agency fees, subcontract labour costs; employers NICs etc

Own wages and drawings, pension payments or NICs; payments for non-business work.

NOTE – business expenses are only allowed in the accounting period to which they relate.  If the expense is spread over two accounting periods for example an electricity bill then you need to apportion the costs between the two periods.

Forward Planning with Chapel Street Bookkeeping

So a top body of accountants has called for the HMRC to delay the self assessment deadline as they feel that there have been too many changes to the tax system this year and there has been an increase in the number of self employed people. Read the full story here: http://www.theguardian.com/money/2014/jan/29/delay-self-assessment-tax-deadline. There is currently around 1.6 million returns outstanding.

With just over 24 hours left to complete your return, the HMRC are still running some webinars that take you through the different aspects of self assessment http://www.hmrc.gov.uk/webinars/self-employed.htm. Having listened to several of the live and pre-recorded webinars they are informative however personally I preferred the live ones as there are opportunities to ask questions.

If you have managed to pull all your hair out completing the 2012/2013 tax return, why not treat you and your hair to a bit of a pamper and contact me to help with your accounts in the future. My services start from as little as £12 per hour, much less than a price of a new haircut.

Submitting your tax return safely

There’s only 7 days left to submit your online tax return. It would appear that the fraudsters are out and about, please check out this article: http://www.theguardian.com/money/2014/jan/23/self-assessment-taxpayers-copycat-website-tax-return-gateway

To avoid falling into this trap make sure that you go direct to the HMRC website, www.hmrc.gov.uk . Click the Self Assessment in the Individuals and Employees box, then click File your tax return online and finally click Self assessment online. That should get you safely to where you need to be.

If you are struggling to get your books in order to meet the deadline of the 31st January then please do not hesitate to contact me.

Help from HMRC

Only 16 days left to submit your 2012-2013 tax return. If your accounts are all prepared and it’s just a case of submitting your return online then the HMRC have compiled a neat little video to show you the process:


It’s not too late to engage the services of a bookkeeper if your records are not yet up to date. The cost of hiring a bookkeeper far outweighs the cost of penalties which will be applied if you’re late submitting you return.

If you need any help preparing your accounts please do not hesitate to contact me.

Self Assessment Deadline

So with only 18 days left to submit and pay your 2012/2013 tax return HMRC has compiled a list of excuses for late submissions https://www.gov.uk/government/news/revenue-reveals-top-10-oddest-excuses-for-late-tax-returns. My personal favourite is ‘my business doesn’t really do anything’.

There are still approximately 4 million people yet to submit their return and submitting your first return can be daunting especially if you’ve put the bookkeeping on the back burner whilst you grow your business. Here are a few additional things to consider:

If you haven’t already signed up to the HMRC Online Services to submit your 2012 -2013 tax return then you really need to think about doing so as soon as possible as once you’re registered they send you an activation code which can take up to 7 days to arrive.

There are penalties if you miss the deadline. The current penalties can be found at: http://www.hmrc.gov.uk/sa/deadlines-penalties.htm. One thing to remember is that not only will you have to pay the daily penalty there will also be additional penalties on the amount of tax you owe.

If you are struggling to find time to prepare your accounts to complete your tax return by 31 January then you might want to consider hiring a bookkeeper. It can cost as little as £12 per hour to hire a bookkeeper to prepare your accounts ready for you to complete your return compared to the charges you will incur for late submission.

I understand that all this can be daunting and can take up a lot of your time but if you need any help or just have a query then don’t hesitate to contact me.

Bookkeeping 2014 Where to start.

So 2014 has finally arrived and it’s time to plan for the year ahead. I’d thought for my first blog of the year it would be best to to talk about the differences between a bookkeeper and accountant.

With the self assessment deadline looming those of you with books that are shall we say a little less than organised may be considering the using the services of a bookkeeper before visiting your accountant.

Here’s a neat little article outlining the differences:


Using a bookkeeper to prepare your accounts ready for review by your accountant can save you time which you can be spending on growing your business and save you money on your final accountancy bill.

Ceri-Ann Lloyd AIAB