Business expenses fall into two categories and should all be declared on your Tax Return. They are allowable and non-allowable. In basic terms, you are allowed to deduct from your company’s turnover all the costs you incur for the sole purpose of earning a profit – these are allowable expenses.
Allowable expenses might include things like rental of business premises, electricity and heating costs and mileage expenses. You cannot claim back costs that you incur for a non-business purpose, such as your own personal expenses, as well as capital costs (i.e. the cost of buying fixed assets or intangible assets), or losses you may suffer when you sell them. Costs which are recoverable under insurance are also not covered.
Remember that regardless of your business status, you also cannot count the cost of purchasing a business premises, or equipment, as an expense. Relief for this kind of expenditure is covered by claiming capital allowance that can be offset against profits.
For comprehensive information on all aspects of expenses can be downloaded from the HM Revenue and Customs website.
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