This Content Was Last Updated on April 18, 2020 by Jessica Garbett
A perennial question is “Can I claim for…”.
The law around claiming expenses for the self employed and in company accounts is that the expense must be “wholly and exclusively” for business. Confusingly for sole traders something that is both private and business can be apportioned to make it “wholly and exclusively”, eg home office costs, car costs, but equally somethings cannot be apportioned and are disallowed, eg clothing – alas its on a case by case basis and the rules are quite fragmented. There is no one definitive list of deducible and non deductible items in statute.
For employees on PAYE, including company directors, the expense must be “wholly, exclusively and necessarily” – this means that very few, if any, expenses can be claimed as HMRC argue that if an expense was “necessary” the employer would pay it. This may be a trap for Yoga Teachers working under PAYE in gyms/studios, but often there is a parallel Self Employment where expenses can be set off. And of course for Company Directors the answer is to claim though the company accounts and the more relaxed “wholly and exclusively” rules, but there can be risks around P11D Benefits in Kind if a business expense has a personal nexus.
For Sole Traders from 17/18 onwards under the rules for HMRC Trading Allowance you can claim the greater of £1,000 or the actual expenses you incur – which is useful if your expenses are not otherwise that high.
There are special rules for deducting travel and subsistence.
- For contractors/directors of PSCs the temporary workplace rules often have to be considered
- For the self employed, HMRC have recently been cracking down on journeys that are “regular and predictable” We’ve written about that, here
- For employees/company directors business travel is generally deductible, but home to work travel is excluded
So, what expenses can be claimed against tax? Well, there is no definitive list, but this is a list we wrote for our Yoga Teacher clients. This list cover most bases, but look at the Expenses section on the Help and Guidance on our website for more detail.