Everyone loves a trier……except HMRC. Some people will try to claim for everything and anything in their tax returns. We’ve seen a few crackers ourselves. However, none of them beat these.

HMRC have revealed the Top 10 most ridiculous expenses claims in Self-Assessment Tax Returns for the year ended 5 April 2015. Would you try any of these??

  1. Flights for a Caribbean holiday – nice work if you can get it
  2. Slightly less luxurious, but still not allowed – a caravan holiday over the Easter weekend
  3. A very generous business owner bought posh watches for Christmas for all of the staff……..despite not having any employees
  4. Armani jeans – claimed to be “protective” clothing by a decorator
  5. Flights abroad to get dental treatment as they had to look good for business meetings
  6. Pet food for a guard dog. Sounds OK…..until it turned out the dog was a Shih Tzu, which could only frighten away very small burglars.
  7. Underwear – OK if you’re in the Full Monty but not for the rest of us.
  8. Friday nights out for “team bonding”, costing thousands of pounds during the year.
  9. One punter claimed his losing bets were business expenses. He obviously didn’t pay tax on any winnings.
  10. A garden shed plus the cost of the part of the garden it sits on

As you can imagine, none of these were accepted.

So, what expenses can you claim?

The phrase that HMRC have traditionally used is that the expense must be “wholly and exclusively” for the purposes of your business to be allowable for tax relief. But, what does this mean?

At its simplest, ask yourself “Would I be spending this if I didn’t have the business?”. If the answer is “No”, then it’s likely to be an allowable expense. Examples would include:

  • Stock – the items you’re buying to sell on, or to use to make your products.
  • Premises costs – rent and then the costs of light, heat, etc for the business premises. Also any repairs
  • Staff costs – wages, salaries and costs of subcontractors
  • General office costs – stationery, tea/coffee
  • Travel costs – travel to and from meetings and appointments
  • IT costs – website, computers and software
  • Advertising costs – networking, leaflets, etc
  • Business assets – the method of claiming the tax may be different, but any assets you buy get tax relief – vans, furniture, machinery

But then there are also the “grey” areas where you have costs that you may have spent without the business, but you can now claim. HMRC are pretty sensible on these – for example, you can claim for a mobile phone.

Business and personal use

Often assets within businesses are used for both personal and business purposes. It is only the proportion of business use of these assets that can be deducted as an allowable expense.

Common sense

In summary, it comes down to common sense. Is it really for the business?

Some of the ridiculous claims could actually be OK……if they were genuinely for the business. For example, it’s OK to have a team night out. Or flights to the Caribbean…..if you have a business meeting or conference to attend.

If in doubt, ask an expert – it’s what we’re here for! Now, I’m just off for a meeting with HMRC….in Hawaii.