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Business expenses claimed against profit while running a business is very important.

The reason is that any qualifying expense would gain some taxable relief, therefore, paying less tax.

What can be classified as a business expense?

The easiest way of explaining this is any amount you spend that relates to day to day running of your business.


When is an expense a deductible or not a deductible expense for tax purposes?

A business expense can be an allowable accounting expense but not a tax-deductible expense.

The impact of non-deductible expense on profit.

The expense that is not an allowable expense would be added back to the profit and therefore chargeable to tax.


 Three main conditions for tax-deductible expenses.

1. This expense must be wholly and exclusively for purpose of trade.

That is the expense must not have a duality of purpose.

An expense with a duality of purpose would have both business and private elements, therefore any private element added back to profits.

2. The expense must not have a capital nature.

When an expense is a  capital expenditure, this must be added back to the profit.

An asset would be classified as a capital expenditure if it is durable. An asset would be durable when it could last more than 2 years.

The business could claim capital allowance relief to reduce the tax due.

3. Items that are specifically disallowed by the legislation.

Examples of disallowed expenses.

  1. Depreciation or amortization of fixed assets.
  2. Private expenditures
  3. Salaries of sole traders and partners
  4. Client entertainment
  5. Fines and penalties
  6. Gifts except if they cost less than £50 and not food or tobacco and must bear clear advertisement for the business
  7. Legal fees that relate to purchasing or acquiring an asset. The exception to this is if the asset is a trading asset.
  8. Capital expenditure


My advice is to always keep a record of all business transactions whether digitally or in paper format.

Information like mileage of every business travel or purchase of business asset could save you a lot of tax.

To read more on tax-deductible expenses, Kindly click 

For more information on how to claim tax deductible expenses, Kindly click to book a free consultation with us or ask more questions.