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What expenses aren’t tax deductible?

15th November 2017

I thought I’d give a list of certain expenses that aren’t tax deductible – but which regularly get claimed, or questioned, by clients.

  • Clothing

Unless you need protective clothing, or have to wear a uniform, most clothing is not tax deductible.  It doesn’t matter if you only ever wear ‘that suit’ for work, you can’t claim for it as an expense.  This has been tested in court (by a Labour peer, no less) and is clear-cut;

  • Depreciation

This is not something that is claimed, but some clients think increasing depreciation will help to reduce their tax bill.  In actual fact, it is just an accounting adjustment and is tax neutral.  The actual purchase of fixed assets (equipment, vehicles) is used as the basis for the tax relief.

  • Spectacles

Although the cost of eye tests are claimable for workers using PC’s – under Health & Safety legislation, the cost of the glasses themselves is generally not claimable because the worker does not use them ‘wholly, exclusively and necessarily’ for their work – but also for personal use.  An exception would be prescription safety glasses if the worker only wore them at work.

  • Entertaining

Although entertaining potential, or existing, customers can be put through a business’s accounts – and reimbursed to a director/employee, there is no deduction for Corporation Tax or Income Tax purposes.  So, if a meal out is part entertaining and part subsistence for a director/employee, it is worth calculating the split between the two.

  • Dividends

We sometimes get asked, ‘if I pay more dividends how much tax will that save me?’.  But, unlike wages and salaries, dividends are not tax deductible against a Company’s profits.

  • Removal costs

Although removal expenses (up to £8,000) paid for by an employer can be tax deductible, this is only where the employee/director is starting a new job in a new area, or if the place where the duties are performed changes.  Tax relief on removal expenses cannot be claimed just because a director moves slightly nearer a place of work.

  • Grocery bills

Although a director/employee can claim for meals bought whilst at a temporary workplace, one cannot claim for doing the week’s shopping and then taking food to work each day – because it would not then be considered ‘attributable to the journey’.

  • Hire car and mileage

If one uses a hire car in the business, one cannot also then claim the HMRC Approved mileage rates (of 45p and 25p) – because these rates are supposed to cover the wear and tear on personally owned vehicles.