When it comes to allowable expenses, things aren’t always as straightforward as we’d like. The idea of reducing your tax bill by claiming legitimate expenses is appealing, but what happens when those expenses fall into a grey area? In this blog, we’ll explore some of the trickier expenses that aren’t always black and white, and why it’s essential to get clarity before you claim.
1. Travel and Accommodation
Where it gets tricky: Most of us know that travelling for business is an allowable expense. But did you know that commuting between home and your regular workplace can’t be claimed? It gets even trickier when you’re working at a “temporary” site for a longer period. If you’re there for more than 24 months, those expenses might no longer be considered temporary, and you could lose the ability to claim them.
Real-life scenario: Imagine you’re a consultant who spends a lot of time visiting clients. Initially, you can claim all your travel and accommodation costs. But if one of those clients turns into a regular contract for more than two years, you might find that those expenses are no longer allowable. It’s always worth keeping track!
2. Gifts and Corporate Entertainment
Where it gets tricky: Corporate gifts can be claimed, but there are strings attached. The key is in the detail—branded gifts (like a mug with your company’s logo) are fine, but a festive bottle of wine without that branding? Nope, that’s considered entertainment, and it’s not allowable.
Real-life scenario: Let’s say you want to thank a client with a small gift. You send them a branded pen set, and all is well—it’s allowable. But if you send them a nice bottle of champagne instead, HMRC might see that as entertainment, which means no tax relief!
3. Home Office and Utility Bills
Where it gets tricky: If you work from home, you can claim a portion of your household bills as business expenses. Sounds simple, right? Well, the challenge is figuring out just how much of your utility usage is “wholly and exclusively” for business. HMRC allows a flat rate of £6 a week without needing receipts, but if you want to claim more, you’ll need to keep a record of those exact costs.
Real-life scenario: Picture a self-employed web designer working from their home office. You can claim part of your electricity, broadband, and heating bills. But if that office doubles as a spare bedroom or hobby space, working out what percentage of your bills is business-related can be a real headache. Luckily we can help with this as we have a very handy spreadsheet for you to calculate this which you can download here.
4. Business Vehicles and Mileage
Where it gets tricky: Claiming for mileage is usually straightforward, but if you use the same vehicle for both business and personal reasons, it can get complicated. If you drive to client meetings, you can claim those miles, but your commute to work or dropping the kids off at school? That part isn’t allowed.
Real-life scenario: Take a small business owner who uses their car to visit clients. They can claim 45p per mile, but they need to make sure they’re only claiming for the miles spent on business. That quick trip to the supermarket on the way? Unfortunately, that’s not claimable.
5. Clothing and Uniforms
Where it gets tricky: Only certain types of clothing are allowable as business expenses. If you need a uniform or protective clothing, that’s fine. But if you buy a new suit for client meetings, it doesn’t count—even if you only wear it for work.
Real-life scenario: If you’re a tradesperson and need protective boots or a branded uniform, you can claim these costs without a problem. But if you’re a consultant buying smart clothes for presentations, those stylish suits won’t be allowed as a business expense.
6. Training and Development
Where it gets tricky: Training to improve skills you already have and use in your business is claimable, but learning something entirely new can be a grey area. If the new skills don’t directly relate to your current business activities, they may not be deductible.
Real-life scenario: Let’s say you’re a photographer and want to take a course on advanced editing techniques—that’s claimable because it enhances a skill you already use. But if you take a course on accounting to manage your finances better, HMRC might not be so generous.
7. Medical Costs
Where it gets tricky: Some medical costs can be claimed, like treatment for a work-related injury. But other expenses, such as general health insurance, may incur extra tax charges. It’s easy to get caught out if you’re not familiar with the rules.
Real-life scenario: If you pay for an employee’s eye test because they need glasses for computer work, you can claim this. But if those glasses are also used outside of work, you may not be able to claim the full cost.
8. Marketing and Websites
Where it gets tricky: Marketing costs are generally allowable, but building a website can get more complicated. If the website is for long-term use, like selling products online, it’s considered a capital expense and needs to be written off over time. If it’s a simpler site, the costs can often be deducted right away.
Real-life scenario: If you’re a restaurant owner and build a website that allows customers to order food, HMRC would likely see that as a long-term asset. But if it’s just a simple brochure-style site with your contact details, that’s something you can fully claim immediately.
The Takeaway
Allowable expenses aren’t always black and white, and it’s easy to fall into a grey area without even realising it. That’s why it’s so important to keep good records and ask for advice when you’re not sure. If in doubt, reach out to your accountant! We can help you navigate these tricky areas and make sure you’re making the most of what you can claim.
We have much more detailed guidance on what is and what isn’t claimable in our Allowable Expenses Guide which you can find in the Resources Page of our website.
