Allowable Expenses

[jj_5]

Hello,

Filling out my self assessment at the moment (sole trader) and I had a few questions:

For the full tax year I stayed with my parents. Paid a weekly rent (or digs) and used their computers/printers etc. for business

Is the money I paid to my parents tax-deductible?

My Car was bought towards the end of the tax year (£2k including insurance) but was bought in my mother's name (trying to lower insurance premiums) {yes I understand this is illegal}

I am named as the 2nd driver but use it for my business.

Are the Insurance, petrol costs, Repair Costs, Fee I paid for the car tax deductible?

(without the car I would have no business - job involves driving around to visit people)

I set up a limited company (which has not traded) I've bought some items from Vistaprint but on the invoice the products are adressed to my limited company's name

Are these still tax deductible?

I incurred several bank charges during the tax year due to my clients mucking me around with payments.

Are these tax-deductible?

I also have a phone which is used personally and for my business, what percentage of this am I allowed to claim as tax deductible??

Think I know the answers to a few of these but thought I'd get some 2nd opinions!!

 

[Testimony]

As none of the accountants have answered this, I will answer it on the basis of having been subjected to an HMRC inspection, and assuming "equality of treatment", my experiences should be justifiable in your circumstances.

However you only have a 1 in 15 chance of being pulled for enquiry, so my rule has always been not to claim the indefensible, but claim and defend those items IF you are given a tug.

Hello,

Filling out my self assessment at the moment (sole trader) and I had a few questions:

For the full tax year I stayed with my parents. Paid a weekly rent (or digs) and used their computers/printers etc. for business

Is the money I paid to my parents tax-deductible?

No, Your rent to parents is for living accommodation, and hence duality of purpose. There may be an argument about claiming for use of their equipment, but conversely, they would need to remit details of that income to HMRC for them to assess if they wish to charge your parents to tax. As you don't impart details of your parents, it is probably better to let sleeping dogs lie.

My Car was bought towards the end of the tax year (£2k including insurance) but was bought in my mother's name (trying to lower insurance premiums) {yes I understand this is illegal}

I wouldn't say its illegal. The insurance companies want the main/most common driver to be the policy holder as they will be on the road most. Lets face it , considering the attitude of the insurance companies to the younger population, it is justifiable that they get insured as named drivers, and not policy holders.

If you paid out the 2k, i would contend it is claimable against your tax return, but e.g. 1,750 towards vehicle, and say 250 against insurance, the former being subject to capital allowances, and the latter being fully claimable against revenue, subject to private use.

HMRC are only interested in the ownership of a vehicle where it may be a limited company who owns it and hence a benefit in kind to an employee. For a sole trader, the attitude is whether or not you paid out the money, not about to whom it is registered.

I am named as the 2nd driver but use it for my business.

Are the Insurance, petrol costs, Repair Costs, Fee I paid for the car tax deductible?

(without the car I would have no business - job involves driving around to visit people)

As above, legal ownership is shadowed by commercial nature of payments. ie the costs of maintaining a car on the road is allowable (subject to private use reductions)

I set up a limited company (which has not traded) I've bought some items from Vistaprint but on the invoice the products are adressed to my limited company's name

Are these still tax deductible?

I would say no, in that these are allowable against the limited company. Even if the company lies dormant for 3 years and then begins to trade, all this pre trading expenditure can be offset in its first year of trade.

In your case, paying monies out for stationery for a company is not wholly and exclusively for the purposes of your own sole tradership, so is disallowed. You may have ordered the stationery, but you did it as a director, not as a sole trader. So forget this deduction .

I incurred several bank charges during the tax year due to my clients mucking me around with payments.

Are these tax-deductible?


You don't state if you have a business bank account in addition to a personal one. If you do, then yes you can claim it without having to defend it. If you run your business through your personal account, I would still claim it, as you can prove that the excess charges are caused by problems with your customers bouncing payments. Match the charges with specific events and it WILL be allowed, even if a personal account.

I also have a phone which is used personally and for my business, what percentage of this am I allowed to claim as tax deductible??

You are the best person to answer this. If you were sitting in front of an inspector of taxes, and he/she asked what % of your phone time was business related, what would you honestly answer?

Some people would say 80%, some would say 5%. Its all down to what you can defend.

I myself claim 75% even though I reckon the truthful answer is more like 25%, but HMRC accepted my 75% on the basis that at least I had considered the private use addbacks, and he couldn't be bothered trawling through itemised bills.

Think I know the answers to a few of these but thought I'd get some 2nd opinions!!

Hope this helps

 

[jj_5]

Thank you very much for your reply. I'd say a good 70% of my calls are business calls and I do pay for internet, which I use on the road.

The car by the way, was 1 grand, with a further £1,000 for insurance unbeleivable high! Hence why I had to go as 2nd driver or it would have been more.

I dont have a business account but charges were caused by payments being withheld im sure I could prove this.

 

[Truemanbrown]

Hello,

Filling out my self assessment at the moment (sole trader) and I had a few questions:

For the full tax year I stayed with my parents. Paid a weekly rent (or digs) and used their computers/printers etc. for business

Is the money I paid to my parents tax-deductible?

If you are a self-employed person, you can claim costs in your accounts that are incurred wholly and exclusively for the purpose of your business.

Having somewhere to do your business paperwork is essential. If you don't maintain a separate office, you can claim a reasonable proportion of those household running costs that represent the space and time in which your office operation occupies your home. This includes a proportion of your rent, council tax and water rates.

My Car was bought towards the end of the tax year (£2k including insurance) but was bought in my mother's name (trying to lower insurance premiums) {yes I understand this is illegal}

I am named as the 2nd driver but use it for my business.

Are the Insurance, petrol costs, Repair Costs, Fee I paid for the car tax deductible?

(without the car I would have no business - job involves driving around to visit people)

Basically, you have two options:-

1. Claim all the running costs of the vehicle and a capital allowance on the purchase of the vehicle and then deduct a proportion for private use;
2. Claim mileage allowance on all business miles.

Whichever route you take you will need to keep some form of mileage record whether to determine the private use proportion amount to be deducted or the business miles itself.

I set up a limited company (which has not traded) I've bought some items from Vistaprint but on the invoice the products are adressed to my limited company's name

Are these still tax deductible?

There is nothing stopping the limited company selling the products, at the same cost, on to you to use!

I incurred several bank charges during the tax year due to my clients mucking me around with payments.

Are these tax-deductible?

Bank charges in a personal account can be claimed against the business profit but only if you can justify that the interest and charges were incurred wholly and exclusively for the business.

I also have a phone which is used personally and for my business, what percentage of this am I allowed to claim as tax deductible??

Think I know the answers to a few of these but thought I'd get some 2nd opinions!!

You can claim for business use of the phone. Best way to determine business use is, if you receive an itemised bill, to mark down the business calls on the telephone invoice.