Business Expenses – What Cannot Be Claimed
When running your own company, there are many business costs and expenses that are able to be claimed back from the business as allowed by HMRC. The list of allowable expenses is extensive and as long as they meet the requirement “wholly and exclusively” in the course of your business then they can be offset against the company overheads. However, some people’s interpretation of what is classed as a business expense can vary and there are certain expenses which are definitely not allowable by HMRC.
Below is a list of some of the common expenses that TBOS are asked about by recruitment agency directors to see if they are able to claim them:-
- Suits and Clothing
Recruitment directors will often ask if they can claim the cost of a suit to see a client as a business expense. Unfortunately, as the definition of what you need to wear to a client meeting varies between clients and because the suit does not become the property of the company following the meeting, this would not be seen as allowable. The only time clothing would be allowable is if there was a uniform or if it was for safety reasons, such as a Hi-Vis vest or hard hat – both of which are unlikely in a recruitment agency environment.
- Travel Cards
Often recruitment agency directors who have to travel to work by public transport will ask if they can claim their weekly/monthly/annual travel cards through the business. Whilst the business can provide travel cards loans to the employees/directors, the actual claiming of the travel card cost is not allowable. Even if the employee/director is visiting clients and candidates each day then each travel expenses needs to be claimed individually to properly demonstrate the cost incurred.
- Sporting Season Tickets
Some recruitment directors feel that entertaining their clients and staff by taking them to sporting events on a regular basis could be a good way of gaining business or boosting staff morale. However, doing this by purchasing a season ticket for the company would not be seen as an allowable business expense.
- Travel to Office
In the same way that travel cards are not allowable in order for directors/employees to go to and from work, it is also not allowable to cover the cost of going from home to the office via car or other means. Even if you have employees who work from home and are asked to come into the office for meetings, this cost should not be reimbursed as it is seen as a business place of work.
Whilst entertaining prospective and existing clients to win future business is allowable through the business (although not to be offset against Corporation Tax or VAT reclaimed), the way they are entertained has to be in a place where business can be conducted. Entertaining clients in a nightclub could be seen as an inappropriate place to sit down and discuss business opportunities so this would not be allowable under business expenses.
TBOS looks after the daily bookkeeping for all of our recruitment agency clients which includes monitoring and managing the expenses allowable through the business. TBOS ensures that the agency directors are abreast of the current rules concerning expenses and make the process of submitting expenses as simple as possible. TBOS also ensures that any VAT is reclaimed on allowable expenses and that agencies are aware of any expenses which are allowable but cannot be offset against VAT or Corporation Tax.