You’re expensing what?
For any of us that needs to do a tax return, you’ll know that one of the important parts of the process is claiming back your business expenses. If you’ve bought a laptop, for example, or an office chair or even a coffee over a client meeting, you can claim these costs back and reduce the tax that you pay on your profits.
Read more about expenses here.
HMRC are lenient in what they’re willing to accept as a business expense. But many have used this inch to take a country mile.
Remember the Expenses Scandal?
Back in May 2009, chaos erupted at Westminster as The Telegraph reported the hoards of MPs claiming outlandish and pricey expenses. The scandal was at full pelt for around five weeks and saw five MPs and two peers jailed in the aftermath.
It all started in 2005 when two journalists put in Freedom of Information requests for MPs expenses. In the same year, the Freedom of information Act (2000) came into force, enabling us to access recorded information held by public authorities. These requests were rejected twice and prompted a legal battle that lasted three years before a High Court judge ruled in favour of the journalists.
In 2008, there was a scramble to redact the information, but all in vain as a hard disk (remember the noughties?) containing a reported two metres-worth of receipts was sent to a number of news outlets. The Telegraph were the first to publish the leaked documents which revealed myriads of expenses claimed with taxpayer money.
Former Conversative MP Douglass Hogg claimed back £2,115 in expenses for cleaning his moat; former Prime Minister Gordon Brown claimed £6,000 in “cleaning expenses”; current MP Michael Gove claimed £7,000 to furnish his London home then a further £13,000 for Stamp Duty on a separate property; Sir Peter Viggers claimed £20,000 in gardening expenses and £1,645 for a 5ft duck house; former Prime Minister Tony Blair claimed £6,990 for roof repairs two days before stepping down; former Lib Dem leader Menzies Campbell claimed almost £10,000 on “scatter cushions, a king-sized bed and a flatscreen television”. The list goes on.
HMRC: they’ve seen it all
Although less outrageous, it’s not just MPs who are guilty of claiming dubious expenses. Lots of us try to slide weird and wonderful “business” purchases under the Self Assessment carpet.
Here are 5 claims that HMRC has rejected as allowable expenses:
- A carpenter claiming £900 for a wide-screen TV and sound bar to “help him price his jobs”
- £40 for extra-wooly underwear for five years
- £756 for pet insurance
- A family holiday to Nigeria
- A music subscription (for music during work)
And it doesn’t end there. It’s not only strange expenses that we flaunt but reasons for not completing our Self Assessments in time.
Take a look at these actual excuses that HMRC compiled from the 2017/18 tax year:
How do expenses work?
All is not lost. You don’t have to file your tax return in fear that your expenses will be publicly ridiculed or smeared across the media. What’s really important is to keep a record of all that you’ve spent. And you should do this from the start of the tax year so you know exactly what to deduct.
For a full guide on what you can expense for your business, here are our top tips.