I prepare the accounts for a sole trader. There have been a few taxi receipts and train tickets that have been used for business purposes. Am I to put these through the accounts as travel expenses or are they to go to drawings?
Would someone please be able to point me in the direction of where I could get a listing of allowable expenses?
rather than pointing you at lists that have many exceptions and special cases I think best to approach the question in a principles rather than rules based manner.
The principle of allowable expenses is that anything that is incurred wholly, necessarily and exclusively for the purposes of the business is an allowable expense.
Things like meals are not generally allowable as we eat to live rather than eat to work so it fails the wholly, necessarily and exclusively test (similar situation with suits. They may be purchased due to work but can be worn for other occassions... Again, this is a general rule and as always there are exceptions).
For your purposes if the travel expenses were incurred purely for the purpose of the business then the taxi fares and train tickets are justifiable expenses of the business.
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
It's useful for deciding which box to enter an expense in on the Tax Return but it can never be a comprehensive list of every expense that's ever been allowable.
If you fancy delving further into this area and travel costs in particular then have a read here:
Thanks Shaun, I am sure that it has been said before but it is very difficult to get a definitive answer to some questions. I know a bookkeeper who does claim for his clients and has never been picked up by HMRC, maybe they haven't got around to checking on him yet!
Mike
Hopefully You haven't replied yet, but is it possible to set a list within the forum of just what is allowed for sole traders? I am sure that there are others like me who would benefit. Mike
-- Edited by Accountingnewby on Saturday 30th of March 2013 02:18:54 PM
Thanks Shaun, I am sure that it has been said before but it is very difficult to get a definitive answer to some questions. I know a bookkeeper who does claim for his clients and has never been picked up by HMRC, maybe they haven't got around to checking on him yet!
Mike
Hopefully You haven't replied yet, but is it possible to set a list within the forum of just what is allowed for sole traders? I am sure that there are others like me who would benefit. Mike
-- Edited by Accountingnewby on Saturday 30th of March 2013 02:18:54 PM
As long as this bookkeeper has not been stupid and claimed 1,000s of pounds of subsistence he will probably get away with it because it is not material enough for HMRC to chase it.
As for expenses, you could claim:-
Motor Expenses - you can claim the business proportion of the vehicle running costs plus a capital allowance on the cost of the vehicle OR mileage allowance for business miles. You can claim for toll fees and parking fees (Not fines) separately when you drive for business purposes;
Other Travel expenses - Any other travel costs wholly and exclusively for business;
Mobile Phone/Home Phone - Business calls only by highlighting the itemised bills;
Use Of Home As Office - Total of utility, rates, rent/mortgage interest and insurance divided by number of rooms (less kitchen and toilet) multiplied by the proportion of time spent in the office;
Stationary, purchases, legal fees (with exceptions), accountancy fees and others incurred wholly and exclusively for the business.
This list is not extensive!
-- Edited by Truemanbrown on Saturday 30th of March 2013 03:02:07 PM
I thought that if I went to see a client and stopped on the way for breakfast and lunch that I would be able to claim this as a valid expense. Also if I then stopped on the way home for dinner I could also claim that? Is this the case?
sorry, the answer to Kate above stands in that we eat to live you do not eat to work.
There are some exceptions including specific industries such as long distance haulage operators but as a general rule what additional expense have you incurred over not eating your meals at home?
That the meal is more expensive is a side effect of where you eat rather than what you eat.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Different accountants/bookkeepers adopt different approaches as subsistence is very much a grey area.
Some take the strict letter of the law like Shaun and others are more lenient like Trueman.
Technically sole traders shouldnt claim any subsistence costs but I tend to allow amounts if they are working away from home. It all comes down to materially and provided the client isnt putting through their full shopping bill then HMRC generally doesnt bother about a few hundred £ here and there as they have bigger fish to fry.
Ltd companies are different where employees are allowed fixed allowances.
Why there should be a distinction between an employee and sole trader in the performance of their duties in respect of what subsistence they can claim, as said before havent a clue, but that tax for you.
Thanks for all replies, I have been reading the Melville taxation, the FT personal tax, the Osborne personal taxation and of course the HMRC. It would seem that the word materiality applies to a lot of accounting issues. I don't mean to keep flogging a dead horse but I do like to try and understand why certain actions are allowed. Regards, Mike
