Determining Business Expenses – Accountancy Services Direct Podcast Episode 2
What qualifies as an expense, well, every company needs to remember one key phrase, “wholly and exclusively in relation to the trade of the business”. Accountancy Services Direct Podcast Andy Fairclough discusses business expenses. Please click below to listen, or read the text below the video.
Anything which fits this phrase can be classed as a company expense.
For example, a company buys a bulk load of ink for their printers, this is for use by the company alone and so is an allowable expense.
That same company purchases a television on behalf of the director, which will be kept at the directors home. This is not a legitimate business expense so it will be disallowable for Corporation Tax purposes.
It is fine for the company to pay for things like this but be aware that there is no tax benefit gained for it. Disallowing these expenses from the Corporation Tax computation is one element but there could also be issues raised in respect of tax and national insurance for the director and an extra national insurance cost for the company.
If you are unsure about whether an expense is allowable for tax or how is the best way to treat it within your accounts then always consult with your tax advisor.
But the general rule is always the best start point, ask yourself “is this expense wholly and exclusively for the purpose of the business?”. Common sense can generally help you do the rest.
If you have any questions on business expenses please email us at Accountancy Services Direct at info@accountancyservicesdirect.co.uk or call Freephone 0800 135 7463 or 0208 144 4634.
30th March 2010 Accountancy Services News From The Web
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