BUSINESS
Tax
TAXING MATTERS Jonathan Amponsah of The Tax Guys explains why not all business expenses can be deducted against tax…
O
NE important way to reduce your tax bill is to claim all legitimate expenses you have incurred for your holistic therapy business. Unfortunately, the general rule that says you can claim all expenses incurred wholly and exclusively for the purpose of your business is not as straightforward as you may think. Here are some surprising things you cannot tax deduct even if you incurred them for your business.
1. ACCOMMODATION You get a contract to work at a spa in Spain for two months next summer. You realise hotel costs will be too high. So, you decide you’ll rent an apartment. Surely you can claim for the costs of the rent against your profits, right? Well it makes sense, but HMRC will deny the claim on the basis that the expenses were not incurred wholly and exclusively for the purposes of your profession. Why? One of the reasons HMRC will put forward is that there is a dual purpose in incurring the expenditure, namely to meet your
ordinary needs for warmth and shelter as well as
new business. The purpose is to negotiate
your stated business purpose.
and generate new business. The income will
2. TRAVEL Let’s say you operate as a self-employed therapist or sole trader rather than limited company. You have a home-based office. You travel to see different clients on a regular basis. Your
be taxed so the expenses should be ok to put through the business, right? Unfortunately, the rules specifically disallow these expenses to be claimed against tax. Part of the reason behind this is that you could have had the same conversation over a cup of tea in the office, plus
journey starts from your
there is an element of
office (at home) and
personal benefit in the
includes a few itinerant
entertainment.
travels from one client to the other client. Can you claim the full travel expenses? I’m afraid not. The tax people deem the travel from your home office to clients as ordinary commuting and therefore it is not tax deductible.
3. CLIENT ENTERTAINMENT
Should part of your therapy (contractual obligation) be to take existing clients to a relaxed restaurant or atmosphere to get results for them, then the cost of this activity is not classed as entertainment and will be claimable.
4. PROMOTIONAL GIFTS
As part of your sales and marketing, you decide
It’s true that nothing ever happens in business
to take clients to a relaxed restaurant to discuss
until a product or a service is promoted and sold. And when it’s sold at a profit, tax gets collected accordingly. However, if you promote your business by spending too much money on promotional gifts to customers and the gifts cost more than £50 per customer, you won’t be able to deduct these costs against your income. Even where the gift cost £50 or less, make sure it carries a conspicuous advert for your business.
5. CLOTHES FOR WORK There is a famous tax case looking at clothes for work. Imagine for a moment that you’re a barrister and you’ve purchase your gown to be worn in court. You don’t wear this gown in public. Can you go ahead and claim the cost of the gown against your tax? Not according to
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holistic therapist 2020
holistictherapistmagazine.com
