Posted by Justine Solomons on 2 October 2019, in Byte Experts, News
When it comes to tax and what you can and can’t claim as an expense, it can get confusing. In this month's Byte Experts, HW Fisher’s Barry Kernon takes us through what counts as an allowable expense.
One of the most common questions that comes up when speaking to clients is what you can and cannot claim as an expense. There are numerous allowable expenses, but it is often the case that people do not take advantage of them.
To help, we’ve put together a checklist below to guide you through what counts as an allowable expense, and what doesn’t. If you’re not sure, it is worth double checking with a chartered accountant or HMRC publish a good list, here too.
Working from home
If you work from home, which many of you may do, you can claim a proportion of home expenses. For example, if you have a room which is furnished as an office (i.e. a computer, desk, professional records etc.) then expenses relating to that room can be claimed for 365 days per year. This would include expenses such as:
- Mortgage interest or rent
- Council tax
- Buildings insurance
- Contents insurance
- Service charges
- Ground rent
- Lighting and heating (calculated according to the number of hours the room is used)
- Repairs and decorating
It is worth bearing in mind that if HMRC is notified that the room is set aside for exclusive business use, it will expect to raise a capital gains tax assessment when the property is disposed of. This can be avoided by ensuring that the room is not exclusively set aside. As long as there are private items in the room too — for example, a wardrobe, spare bed or children’s toys — no capital gains tax assessment can be raised.
Where there is no separate room, it is still possible to make a claim based on the amount of time spent at home, the amount of time working, and the amount of space generally devoted to the author’s business use. As long as there is a reasonable rationale for the claim, HMRC will accept it.
The rules are stricter where the writer is an employee, for example, of their own company, but it is still possible to obtain tax relief if structured correctly.
If you have a professional subscription, such as a membership with the Society of Authors, London Library, Writers’ Guild, NUJ etc., you can claim this as an expense.
Telephone, mobile and broadband
If you use broadband as a research tool (which I imagine most of you do), this can be claimed as an expense. Although, if there is also private use of the broadband involving additional costs only a reasonable apportionment of the cost should be claimed.
If you have a business mobile and stay within the tariff, then you can claim 100% of the costs. Where this is not the case and there is mixed use, the costs need to be apportioned to exclude private use. Landline costs should also be apportioned in the same way.
Again, the rules are different where a company is used, so more detailed advice is needed in those cases.
Travelling for work
If you travel for work, then this is an allowable cost, but there are some rules that are worth remembering.
- If an overseas trip is undertaken to carry out book research and then a few days’ holiday are enjoyed at the end of the trip, the travelling cost is allowable in full, but the accommodation costs need to be apportioned to exclude the private element.
- If you go on holiday and book ideas and book research crop up, no part of the travelling and accommodation expenditure can be claimed, except for incidental local costs incurred on the book project.
- Food and drink costs while you are away from home (in the UK or abroad) has to be reasonable and cannot include entertaining expenses.
There are two ways of calculating driving expenses. Firstly, the actual running costs can be calculated to include fuel, repairs, servicing, insurance, road tax, financing or leasing costs, and these can then be apportioned according to the business mileage as a percentage of the total mileage. A claim can be added for items such as parking, road tolls and depreciation (capital allowances).
Secondly, it’s possible to claim a mileage allowance. Business mileage needs to be logged and then claimed at 45p per mile for the first 10,000 miles and 25p thereafter. It is also possible to claim finance charges, parking and road tolls.
Use of the mileage allowance is not available to if your turnover exceeds the VAT registration limit in the year the car is purchased. Once the method to be used has been chosen, this must be used each year until the car is changed.
Clothing and appearance
Not a great deal can be claimed under this heading, particularly as clothes are generally not allowable, except for unusual items such as uniforms, protective clothing etc. However, claims for makeup and hairdressing for television appearances etc. are generally acceptable.
There are number of more routine expenses that are usually allowable, including:
- Computer expenses
- Theatre and cinema tickets
- Reference books, CDs, journals, newspapers
- Courses and conferences
- Repairs and maintenance
- Accountancy and other professional fees
- Capital allowances
Don’t forget that record keeping is important
HMRC asks that records are kept of all expenses. Receipts are not a legal requirement, but it is advisable to keep as many as possible. Annotated bank statements and credit card statements are acceptable. I often suggest to clients that it is helpful to keep a diary as a non-financial confirmation of professional activities during the year. This is often particularly useful in supporting expenses being queried in HMRC enquiries.
About HW Fisher
HW Fisher is a top 25 UK chartered accountancy firm. We are proud to work with a wide variety of creatives, including authors, journalists, playwrights, actors, vloggers, film directors, comedians, poets, record companies, concert organisers, composers, agents, publishers, advertising agents and PR consultants.
Whatever stage you are at in your career, we can offer specialist advice to help reduce your tax burden and meet your financial goals.
If you have any questions on the above, we are always happy to offer a free consultation. Please get in touch – email@example.com
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