In order to produce a profit and loss account and calculate taxes due, a business may claim expenditure that they incur whilst carrying out the trade they are involved with.
The main thing to remember when putting expenditure against the business is whether it is wholly and exclusively incurred in the performance of duties within the business. In simple terms if you would have incurred the expenditure anyway without operating a business then the cost is usually not allowable.
Allowable expenditure can include the following items:
- Direct cost of sales - e.g. products that are purchased to re-sell or use as part of the sale to the client.
- Direct labour costs involved with selling the product or service to your customer.
- Other wages incurred in the business as a whole.
- Property expenses involved with running the company e.g. rent, rates and light & heat.
- Direct telephone, mobile and fax usage.
- Other general admin expenses such as stationery, postage and internet services.
- Professional fees such as legal and accounting charges.
- Travel expenses including car (mileage), or public transport.
There are other costs that may be incurred not listed above. Use the above rule to gauge whether the cost is wholly and exclusively incurred by the business and thus whether it should be claimable.
Furthermore, there are other costs, possibly personally incurred, that can be claimed in part, based upon usage...
- Use of home element if you work from home.
- Home telephone, mobile or broadband.
- Computer equipment and use of car.
Finally, there are certain costs that are not claimable through the business even though you may have to purchase them due to the business you are involved in:
- Suit and smart clothes.
- Prescription glasses, contact lenses or eye sight tests (you need to see regardless!)
In summary, it's always worth checking whether an expenses is allowable through the business and if not we can always make an adjustment or confirm that this should not be claimed.
For further details please see out Expenses Guide - Getting started.