With just over two weeks until the Self Assessment deadline, taxpayers who have yet to submit their tax return have been thrown a lifeline in the form of expert guidance to assist them in fully utilising their business expenses within HMRC’s regulations on allowable expenses. David Redfern, managing director of DSR Tax Claims Ltd has issued his well-timed advice in order to assist the millions of taxpayers who have yet to file and submit their online Self Assessment tax return.
Taxpayers who are required to submit a Self Assessment tax return can do so as soon as the tax year has ended on 5th April. However, HMRC figures have shown that of the more than 11 million taxpayers who are expected to submit a tax return, nearly 4.8 million of those taxpayers left it until January last year to submit their Self Assessment, with 758,707 leaving it until the last day to submit. Redfern issued his guidance to help soothe last-minute panic regarding expense claims. He commented “In challenging financial environments, it is vitally important to claim tax relief on all your allowable expenses – but allowable is the key word. Not all expenses are allowable and those that are must meet HMRC’s “wholly and exclusively” benchmark, in that they must be solely for business purposes as well as applicable to the running of your business”.
Business owners can claim for a wide-range of allowable expenses providing they have evidence that the expense has been incurred for business purposes. These expenses can include not only physical items such as tools, equipment, premises and stock, but also expenses such as professional fees like legal or accountancy costs, advertising costs as well as bank charges and other financial expenses such as interest fees or insurance costs. However, Redfern warned that not all these expenses are allowable, commenting that “Such non-tangible expenses can easily mount up but not all of these are allowable – for example, while the interest on loans or finance agreements are allowable, any actual repayment wouldn’t be an allowable expense. Similarly, while certain legal fees are accepted by HMRC, if the legal advice pertains to any criminal act on your part, it is not considered an allowable expense. If you are in any doubt as to whether the expense will be considered by HMRC, expert advice should be sought”. In addition, easily forgotten costs such as professional fees and subscriptions, as well as subscriptions to trade journals, can be included in your tax return as an expense.
Employees who are subject to Self Assessment are not able to claim such a wide range of allowable expenses, because HMRC considers some of these expenses to be the responsibility of an employer. Some areas of expense are still accepted. Redfern advised taxpayers to ensure that they are keeping records of any mileage they make to temporary workplaces, stating that “If you are required to travel to a temporary workplace, you can claim a mileage allowance payment of up to 45p per mile and if your employer only reimburses you for a part of these costs, you can claim the difference up to the approved MAP threshold. However, mileage costs do not apply to your normal place of work, no matter how long your daily commute may be”. Professional subscriptions and the cost of laundering and maintaining any work uniform are also allowable under HMRC regulations.
Redfern cautioned, however, that there are some daily expenses that are not allowable on a tax return, such as everyday civilian clothing, daily food and accommodation expenses. He stated, “We all need clothing, food and a roof over our head as a matter of course so HMRC do not consider general expenses of this nature because they argue that a taxpayer would always have these expenses whatever the nature of their job or business”. He warned taxpayers that HMRC would require evidence that any expenses had actually been incurred, instructing that mileage records, receipts or invoices are essential to provide evidence of the claim.