Allowable and Non-Allowable Business Expenses

Information Sheet 6Allowable and Non-AllowableBusiness ExpensesNon-allowableAllowableCost of goods bought forre-sale or goods usedCost of goods or materials bought forprivate use; depreciation of equipment.Cost of goods bought for re-sale, costof raw materials used, direct costs ofproducing goods sold; adjustments foropening and closing stock and workin progress; commissions payable;discounts given.Taxi and minicab drivers and those inroad haulage should include fuel costhere.Construction Industry Payments made for non-business work. Construction industry subcontractorpayments (before taking off any tax).Wages, salaries and otherstaff costsCar, Van and travelexpensesRent, rates, power andinsurance costsRepairs and renewals ofproperty and equipmentTelephone, fax, stationeryand other office costsOwn wages and drawings, pensionpayments or NIC contributions,payments made for non-business work.Non-business motoring costs (privateuse proportions), fines, costs of buyingvehicles, travel costs between homeand business, other meals.Costs of any non-business part ofpremises, costs of buying businesspremises.Repairs of non-business parts of premisesor equipment, costs of improving oraltering premises and equipment.Non-business or private use proportionof expenses, telephone, fax, computerhardware or other equipment costs.Salaries, wages, bonuses, pensions,benefits for staff or employees, agencyfees, subcontractor labour costs,employer’s NICs etc.Car and van insurance, repairs, servicing,fuel, parking, hire charges, vehiclelicence fees, motoring organisationmembership, train, bus, air and taxifares; hotel room costs and meals onovernight business tripsRent for business premises, business andwater rates, light, heat, power, propertyinsurance, security, use of room as anoffice (business proportion only).Repairs and maintenance of businesspremises and equipment, renewals ofsmall tools and items of equipment.Telephone and fax running costs;postage; stationery; printing and smalloffice equipment costs; computersoftware.0371 IS6 Production V1 1 Business Education & Support Team

Information Sheet 6Advertising and businessentertainment costsInterest on bank andother loansBank, credit card andother financial chargesIrrecoverable debtswritten offAccountancy, legal, otherprofessional costsDepreciation and loss/profit on sale of assetsOther business expensesEntertaining clients, suppliers,customers, family and friends,hospitality at events.Repayment of the loans or overdrafts,or finance arrangements.Repayment of the loans or overdrafts,or finance arrangements.Debts not included in turnover, debtsrelating to fixed assets; general baddebts.Legal costs of buying property andlarge items of equipment; costs ofsettling tax disputes and fines forbreaking the law.Depreciation of equipment, cars, etc;losses on sales of assets.Payments to clubs, charities, politicalparties, etc; costs of ordinary clothing.Advertising in newspapers, directories,etc. Mail-shots, free samples, websitecosts.Interest on bank and other businessloans, alternative finance payments.Bank, overdraft and credit charges,hire purchase interest and leasingpayments; alternative financepayments.Amounts included in turnover butunpaid and written off because theywill not be recovered.Accountant’s, solicitor’s, surveyor’s,architect’s and other professional fees;professional indemnity insurancepremiums.Depreciation and loss/profit on sale ofassets are not allowable expenses butclaimed elsewhere.Trade or professional journals andsubscriptions, protective clothing.VATAllowable expenses costs can include any VAT, which is not recoverable. This will not include any input VATpaid on capital items. However, it should be included in their cost if a claim to capital allowances can be madeon them.If allowable expenses are shown net of recoverable VAT, turnover should be shown on the same basis. As analternative, receipts and allowable expenses can be shown gross of VAT and the net payment to Customs andExcise as an expense. Using this method, a net repayment would be shown as a taxable receipt.For more information visit our website at www.hmrc.gov.ukThis information is for your guidance only; it does not cover all you need to know about this subject. Please refer to HMRC or Business Linkfor more help. ©Crown Copyright 20100371 IS6 Production V1 2 Business Education & Support Team