Allowable Business Expenses
As we approach the end of lockdown and life starts to return to normal, so does our work life. With an increase in business meetings, travel, and staff returning to the office full time, it’s important to remember which expenses are allowable for tax purposes and which are not.
More business meetings could mean clocking up more mileage than usual, so it is important to note the different allowable expenses incurred based on whether you use a personal or a company car. Using a personal car for business travel means you can only claim on the mileage that is wholly and exclusively for business purposes – you can claim 45p per mile for the first 10,000 business miles traveled in a tax year and above that, you can claim 25p per mile. If, however, you have use of company cars and the company does not reimburse you for fuel, you can reclaim this using the advisory fuel rate provided by HMRC for each business mile covered. On top of this, the company can claim insurance, repairs, parking, breakdown cover, MOT, and services. The advisory fuel rate is less than the mileage rate for personal cars as this only covers fuel whereas the mileage rates cover the total running costs of the vehicle per mile.
Business mileage is described as travel an individual is obliged to make so they can complete the duties of their employment, this does not include commuting between their house and a permanent workplace. A permanent workplace is classed as a location regularly attended by an employee that follows a regular pattern (for example, an office an employee works in every Monday). Conversely, if an employee has no permanent workplace, then travel is not an allowable expense as all travel is considered ‘ordinary commuting.
In terms of entertaining staff and clients, there are very different rules between the two. Entertainment is considered as any type of hospitality (provisions of food and drink, accommodation, sports events and the like). Any of these provisions which involve any person who is not an employee (for example a current or potential client) does not count as an allowable expense and would be paid for from the company’s profits. However, should this exclusively be staff entertainment it is allowable for tax – if the annual entertainment costs per employee exceed £150, the whole amount becomes treated as a benefit in kind.
Other office-based allowable expenses include equipment expenses, stationery costs, advertising, work phone contracts, and business broadband payments, etc.
If you would like assistance with your expenses then please get in touch – 01273 441 187