Self Assessment – What is a legitimate expense?
Like every accountant dealing with self assessment claims up and down the country, we’ve seen some inventive claims for expenses over the years. As we are now approaching the peak season for self assessment tax returns we thought we’d share some of the best. And maybe provide some guidance too… although not so much as to do ourselves out of a job! If you need help with Self Assessment get in touch. We can often help save you some money off your tax bill.
When you run a small business, the lines will often get blurry and every receipt you have starts to look like a legitimate deductible expense. Your home feels like your office (trust me – I’ve been there!). Your phone feels like your business phone line and nothing else.
However, mixing business and personal costs will set you up for trouble when it comes to tax
Probably the biggest issue we run into is home internet and phone lines. Your home internet is not a 100% business expense. HMRC are very likely to take a dim view unless if you try to claim it is. The only exception would be if you have two lines and one is dedicated to your office. Let’s be honest with ourselves here for a second or two… You would still have an internet connection at home if the business didn’t exist.
Entertainment Costs
Sadly, I hate to have to break it to you, but lunch with your spouse also doesn’t count as a business meeting. And entertainment costs for staff have their own tricky set of rules to navigate. As a general statement here there are annual limits (which are not huge). And, most entertainment costs are not allowed as a deductible expense anyway.
A more entertaining one I read the other day on Linkedin (pardon the pun) was someone trying to claim their Netflix subscription as client entertainment. Again, you will struggle to justify this if you are unfortunate enough to have an inspection. Likewise another one that was suggested of your dog’s vet bills. No these do not count as office security expenses sorry.
A general rule
There is a fairly good general rule to consider with all business expenses. Ask yourself, “Would this expense exist if my business didn’t?”. Once you have done this, we can get into any technicalities of the many HMRC rules if we need to.
Most small business owners when making these errors are not trying to deceive. A tax return can be overwhelming especially if you do not have a background in finance. And, at times the HMRC guidance isn’t the easiest to read and understand.
This is why it is time to get help. Our rates for supporting with Self Assessment tax returns are not as scary as you might think. And we can take a lot of the pain out of the process for you. We always commit to explaining everything in Plain English. And if you don’t understand, ask us to explain again. Fees are always fixed so there are no nasty shocks if we need to send you an extra email or two to explain things.
And now the boring bit… As professional accountants we are regulated in everything we do, so you can be sure of the best advice. Should you run into any issues with HMRC they are ‘on us’ and we will always be on hand. We also offer a monthly interest free standing order option for our annual services. This comes with the bonus that we are available to provide support and guidance throughout the year for any questions you may have. And the best bit, if it’s an email relating to existing business, we won’t charge you for the pleasure. Meaning, there’s no need to put things off or stew on them.