To claim or not to claim?

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Your business will pay tax on the profits it makes. Profits are generally determined after deducting ‘any expenses incurred wholly and exclusively for the purposes of the business.’ You must obviously understand the distinction between ‘business expenses’ and ‘personal expenses’ and then be aware of three points which are relevant:

    • Be sure to keep proper records of all relevant business expenses. The tax man will expect to see appropriate receipts supporting any claim for business expenses. He will also expect these to be properly filed and appropriately cross-referenced to records of payments made. He will also expect you and your staff to keep proper records of car journeys undertaken on behalf of the business where you are claiming for this on the basis of mileage undertaken. And don’t forget to note the times you are away from the office to ensure you make proper claims for subsistence.

    • Some expenses – even when legitimately incurred in the course of the business – are simply not allowed by the tax man as being ‘deductible’ against your trading profits. Entertaining is the most common example of this, but some types of repairs and legal expenses may also fail to qualify. And special rules apply to all types of ‘capital expenditure.’

    • As the business world becomes more ‘virtual’, the distinction between business life and private life becomes more blurred. Simply bear this in mind when considering what may constitute ‘business expenses.’ This can be particularly important when you run your business from an office at home.

Make sure you have a watertight system of record keeping in place. Then make sure that you accountant has a thorough understanding of what you do, so that you can work with him to ensure that all relevant business expenses are identified and claimed.

 

Author: Businesswise Accountant

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