Taxpayers often become confused about what they can and can’t claim as a tax allowable expense but generally speaking something which has a duality of purpose is not permitted.
So what does that mean? Well, if you as the business owner, or indeed anyone else, benefits personally as a result of the expenditure, then it is not deemed to be “wholly and exclusively” for the purpose of the trade. This is particularly true where the cost cannot easily be separated into a business and private portion, as perhaps one could with, say, the cost of telephone calls.
For example, if you were to go on a business trip to Paris, but take your beloved along with you so that they can do some sightseeing and you can enjoy a few romantic evenings together, then it’s not just your business which will see a benefit (hopefully!).
Likewise, if you need spectacles because you cannot see properly to do your book-keeping, you presumably will also need them to read your Mills & Boon or the daily rag. The spectacles are not required wholly and exclusively for business purposes, even though you first realised you needed them when at work. On the other hand, if you need specialist goggles or protective footwear to adequately undertake your trade, then that expenditure would be allowed.
Although the rule is almost as old as the laws which govern our tax system, it can sometimes be a grey area and many cases have been challenged in court. If in doubt about whether an expense can be considered as allowable for tax purposes, speak to your tax advisor.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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