Don’t cut corners with your expense claims – you could end up paying a lot more if you don’t make acceptable submissions to the the taxman. Susan Hutter gives a timely reminder for the new tax year
One of the benefits of running your own business or being a sole trader is that you can reduce some of your tax bill by claiming certain business expenses.
However, remember this is not a meal ticket to spend freely and claim personal expenses too.
As you can imagine, HM Revenue and Customs (HMRC) is very wise to any untoward activity and has the right to investigate if it feels your claim does not ‘add up’.
The HMRC takes a particularly dim view of business owners that estimate their motor expenses. It is not currently acceptable to claim motor expenses from your home to place of work.
You can, however, claim motor expenses from a private hospital to another separate office.
The easiest and accepted way to claim is by calculating your vehicle mileage – you are allowed 45p a mile for the first 10,000 business miles and thereafter 25p a mile.
You should also be prepared to keep a detailed log of your business mileage and the reason for your business journeys.
This way, the HMRC is more likely to accept the claim if you do find you have to drive between two conferences in one week from Lands End to John O’Groats.
Other travelling expenses
Lots of consultants in private practice will find themselves travelling to training events and conferences both in the UK and abroad.
The good news is that all business-related expenses, including travel, accommodation and sustenance are tax-deductible. But, if you take a spouse, then you cannot claim expenses for them.
Should you wish to combine a business trip with a holiday, then you must be reasonable about where the division starts. Let us say you are away for ten days, and five days are business-related ones, then you will be allowed expenses for this period.
Use of home as an office
Many doctors use a room in their home to write reports and do other administrative work. As long as this room is used for business, you can claim the proportion of the room as part of the overall home and factor in items such as mortgage interest and utility bills.
But note that if the room is not used exclusively for business, then the claim should be reduced.
You cannot claim for a designer suit or dress, even if you like looking smart for work. But, you can claim for any protective clothing.
If your spouse or children work for you on a regular/semi-regular basis – such as performing book-keeping or IT maintenance – then you are allowed to claim for their salaries.
However, be sure that the salary you pay them is commensurate with the level and hours of work they perform. Paying your spouse £20K for dropping off the accounts once a year will not be viewed as acceptable by the HMRC.
Finally, there are still many items you can claim legitimately – expenses are not always a draconian affair.
Items such as computers and other IT-related expenses for the business, journals and other subscriptions, professional indemnity cover and all training can be submitted against tax.
Remember to keep all receipts as well as all your back-up documentation.
As with all business accounts, you should keep all the records for at least six years, although best practice is seven to be on the safe side.
Susan Hutter (right) is a specialist accountant for the medical profession at Shelley Stock Hutter LLP