The golden rule: wholly and exclusively for business
For an expense to be deductible against Corporation Tax, HMRC requires that it is incurred wholly and exclusively for the purposes of the trade. Where an expense is partly business and partly personal, only the business proportion can usually be claimed.
Common allowable expense categories
- Office costs: rent, utilities, stationery and everyday supplies. Higher-value equipment is usually claimed through capital allowances rather than as a straight expense.
- Travel and subsistence: train, fuel and parking for business journeys, plus reasonable hotel and meal costs while travelling for work. Ordinary commuting between home and a permanent workplace does not qualify.
- Mileage: using your own vehicle for business journeys can be claimed at HMRC’s approved mileage rates: 55p per mile for the first 10,000 business miles in a tax year, then 25p per mile after that.
- Salaries, pensions and staff costs: wages, employer’s National Insurance, and pension contributions for directors and employees.
- Marketing and advertising: website costs, print and digital advertising, and similar promotional spend.
- Professional fees: accountancy, legal and other professional services relating to the business.
- Vehicle running costs: fuel, servicing, insurance and repairs where a vehicle is owned by the company.
- Insurance premiums: professional indemnity, public liability and similar business cover.
- Banking and finance costs: business bank charges and interest on business loans.
- Phone and broadband: the business-use proportion of phone and internet costs.
- Staff entertainment: modest staff events within HMRC’s exemption limits. Client entertainment is treated differently, see below.
- Eye tests: where required for employees who use display screen equipment.
What you cannot claim
A few areas commonly catch companies out. HMRC does not allow a deduction for purely personal expenses, fines and penalties (including parking tickets), the cost of entertaining clients or customers, and capital expenditure, which is instead relieved through capital allowances rather than as a day-to-day expense.
How MLA Chartered Accountants can help
We prepare your company accounts and Corporation Tax return with a close eye on allowable expenses, making sure you claim everything you are entitled to while keeping your filings fully compliant.