We know that understanding what you can and can’t claim as a business expense on your tax return can be confusing. In some cases, certain rules can feel a lot like grey areas – but trust us, when it comes to HMRC, there is actually very little room for interpretation. You need to ensure that your deductions are 100% compliant with their rules and regulations, otherwise you could be in for a pretty hefty fine (or worse).
To help clear things up, we’ve put together a list of 7 things you CANNOT claim as a business expense on your tax return.
1. Commuting costs
This can get confusing because you CAN claim business travel expenses – but only if the journey is outside of your normal place of work. So, for example, if you have to travel to meet a client or attend an off-site meeting, you can claim the cost of your travel. However, if you’re just travelling to and from your regular office, then that doesn’t count.
We know, another confusing one. You are able to claim for the cost of any specialist clothing that you need for your job – for example, uniforms for your workers or hard hats for construction workers. But if you’re just claiming for the cost of your everyday clothes, even if they’re super smart business clothes, then that’s a no-go.
3. Client Entertainment
Look, we know that it can be super tempting to try and claim the cost of that fancy business lunch you took your potential client out to – but sadly, you can’t. Nope, not even if it was to discuss a big contract that you ended up landing.
Client entertainment can be very beneficial to your business, there’s no doubt about it, but if it were tax deductible, it’s safe to say this privilege would be heavily abused.
If you think you’ve found an exception to this rule, you should definitely speak to your accountant or financial advisor about it before you go ahead and try to claim it.
4. Fines and Penalties
This one should be pretty obvious, but if you’re speeding on your way to a business trip, you can’t claim the fine back as a business expense. There’s no way on earth that HMRC is going to see speeding as an essential business cost – and the same goes for parking tickets and things like penalties for submitting a late tax return.
5. (Most) Food and Drink
If you’re out on a meeting at a client’s office or on another kind of business trip, you can claim back the cost of any business-related food and drink that you purchase. But if you’re claiming for the cost of regular food and drink consumed at your office or business premises, that’s a no-go. You can’t claim lunch every day as a business expense, sadly.
6. Personal Insurance
While business insurance does count as an allowable expense, any policy that you take out for personal reasons – such as life insurance, health insurance, or insurance for your personal belongings – cannot be claimed as a business expense.
7. Pension Payments
If you make regular pension payments, these unfortunately cannot be included as a business expense on your tax return. This is because pensions are considered to be a personal expense, and as such, they’re not eligible for tax relief.
It’s important to understand what you can and can’t claim as a business expense on your tax return. While it can be confusing, there are some clear cut rules that you need to follow.
If you’re ever unsure or encounter what you think is a grey area, make sure to speak to your accountant for advice. You don’t want to end up on the wrong side of HMRC!