Whether your business trades as a limited company, a partnership or as self-employed, when preparing financial accounts and tax returns, you need to consider which expenses can be claimed against your business income.
In simple terms, an expense will be categorised as either “allowable” or “non allowable” for tax purposes.
There is an underlying rule set by the Inland Revenue that an expense will be allowable for tax relief if it is “wholly and exclusively used for business purposes”. Remember this rule when considering the expenditure in your circumstance. Linked to this principle is the “duality concept”, whereby if an expense is partly used for business and partly for personal use, it will most likely be disallowable.
Most common and regular costs you can claim as allowable expenses
Clothing costs
Clothing costs can include uniforms and protective wear.
The Dental Scrubs you wear in your practice are the only clothing items that are allowable for tax relief as they are considered “wholly and exclusively” for business use.
Ordinary day to day clothing e.g. suits, trousers etc. are not allowable expenses; these items of clothing could be worn outside of work and therefore hold a personal element, which results in them being disallowable.
Courses and seminar costs
Courses and seminar costs can include the registration cost of the course/ seminar as well as any other costs that are directly linked to attending the course/ seminar; this includes travel, accommodation and subsistence.
Please be aware that if combining a seminar trip with a personal excursion (i.e. holiday) then it is likely that the flight/ accommodation costs will be disallowed under the “duality” principle.
Entertainment
Staff entertainment is the only type of entertainment that is allowable for tax purposes and there are limits as to how much can be claimed per employee and certain rules that have to apply. This allowance usually applies to staff Christmas parties and other similar events throughout the year.
Business meetings with colleagues are not generally allowable, however, if business lunches are held on employer’s premises and are available to all staff, then this expense would be allowable.
You cannot claim for entertaining clients, suppliers and customers as a taxable deduction.
Financial costs
Financial costs can include bank and overdraft charges and interest, interest on business loans, hire purchase interest and alternative finance payments e.g. Islamic finance.
Insurance costs
Insurance costs can include any insurance for your business e.g. public liability insurance and professional indemnity insurance.
Lab and materials
Any lab costs you incur can be claimed. Also any consumables, such as rubber gloves, that are required to treat your patients.
Legal and professional costs
Legal and professional costs can include the hiring of accountants, solicitors, surveyors and architects for business reasons.
Marketing and Advertising costs
Marketing and Advertising costs can include advertising in newspapers and directories, including online directories, networking costs and website costs.
Motor costs
Motor costs can include fuel, parking, repairs and servicing, vehicle insurance and tax, and hire charges.
You cannot claim any motoring fines or expenses for any travel between home and work.
It’s important to note that only the business element of these costs can be claimed. The easiest way to claim your costs in your accounts is to keep a mileage log of business trips. You can then claim at 45p per mile.
Office costs
Office costs for your business can include phone and internet bills, postage, stationery, printing, computer software your business and regular payments to renew the licence for that software.
If you own a dental practice, there will be additional items that are allowable such as flowers and magazines for the patient area, tea/coffee for patients and staff, air fresheners etc.
Premises costs
Premises costs can include, rental of your business premises, business and water rates, utility bills, property insurance and security of the premises.
Works to repair the property or redecoration costs may also be able to be claimed. The devil is in the detail here so make sure you tell your accountant exactly what work has been carried out.
Staff costs
Staff costs can include staff salaries, bonuses, pensions and benefits, and other subcontractors, including associates fees.
Subscription costs
Subscription costs can include professional organisation memberships if related to your business, and professional journals.
The BDA & GDC are the most recognised dental subscriptions but other subscriptions would be allowable also if they are solely used for business purposes.
Travel costs
Travel costs can include train, bus and taxi fares, hotel room costs, meals on overnight business trips.
There are many different costs a business can incur and the above is only a list of the most common costs. Other costs such as equipment, machinery and business vehicles can also be claimed as they attract a different allowance called Capital Allowances.
Engaging with a knowledgeable accountant is by far the best way of ensuring you can claim as many business expenses as possible but also keeping you within the allowable parameters also. If you’re looking for a proactive accountant please get in touch on 01872 300232 or email us at hello@hivebusiness.co.uk.
