ALLOWABLE BUSINESS EXPENSES
The main expenses that can be deducted from profits as revenue expenses are:
- Running cost, including heating, lighting, rent and rates, telephone, postage, advertising, special clothing, cleaning and repair, but not improvements (a capital expenses). I you live on your business premises you can claim a proportion, but then be liable to CGT and business rates.
- Research and development costs. As from 12 April 2000 you can claim R&D tax credit if you invest at least £ 25,000 in the tax year. This allows deduction of 150% of qualifying expenditure, plus a cash payment of £ 24 for every £100 if the company is not making profits. Staff wages and relevant consumable constitute qualifying expenditure, as well as some cost of subcontracting R&D
- Goods bought for resale and materials for manufacturing, but not plant, cars or machinery (capital expenses), although some smaller items may be allowable.
Carriage, packing and delivery costs
- Wages, including your spouse's and the directors, but not sole traders or the partners.
- Interest on business loans and overdraft, but not on partners' advances
- Charges for hire, hire purchase and leasing, but not the cost price( capital expenses)
- Insurance
- Premiums for employees' liability insurance, including directors; and officers' liability and professional indemnity insurance and payment of work related uninsured liabilities.
- Other overseas expenses - weekend and overnight conferences
- Expenses of business trips but not travel between home and office
- Car running expenses plus the cost of fuel used for business purposes.
- The cost to an annual staff party to a maximum of £ 150 per head per annum
- Some professional fees eg Audit fee, legal advice but not penalties
- Bad debt, but a general provision for a percentage of unspecified bad debt
- VAT on business expenses eg petrol not if you have a VAT number
- Charitable gifts, including gifts of shares to charities
- Business gift but not cash of up to £ 50 per annum
Companies' allowable expenses against profit are similar to those for the sole trader and partners, except you can also deduct director' pay.
