Accountancy Tips - Expenses - X-Forces Enterprise
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Accountancy Tips – Expenses

Broadhead Accountants

Broadhead AccountantsIn a business determining which expenses are allowable is important, as these items are included in the taxation calculation each year.

Key jargon: Tax deductible

Tax deductible items are allowable in calculating the profit of a business for taxation purposes (where profit equals income less expenses).

Deductibility: General Rule
Generally, expenses that relate to earning income in a business are tax deductible. Private items are usually non-deductible.

Deductibility; Specific examples:

Item Tax Treatment
Entertainment Non-deductible
Use of a private motor vehicle/ motorcycle or bicycle Claimed on the basis of business mileage travelled
Bad debts (uncollectible invoices) Claimed based on the timing of the write-off
Clothing Generally Non-deductible
Food Generally Non-deductible
Research and Development Enhanced deductions may be available
Staff private medical insurance costs Deductible but must be included in PAYE reporting.

Dealing with Business Assets as Expenses

Costs relating to business assets are not directly allowable, and are dealt with in a different way. A record should be kept of these items, as a Capital Allowance deduction is often possible. In broad terms Capital Allowances allow for the costs of assets to be claimed. The claim may be allowed fully in one tax year or phased across several tax years.
*Remember costs for the business asset will likely hit your cash-flow all in one go!*

Record Keeping

Tracking expenses across various classifications can be useful both in terms of your own business and reporting to HM Revenue and Customs. Limited Company directors also have a requirement to keep accurate accounting records under company legislation.

To create the initial expense transaction in your accounting system, and to record this, make payment for business expenses directly from the business bank account. Any documentation such as receipts/invoices in support of the transaction should be held for six years.

For more information visit:
Twitter: @BroadheadAccts
Facebook: @broadhead-accountants-limited

X-Forces Enterprise (XFE)
Is an award-winning Community Interest Company that nurtures entrepreneurial ambition in the UK military community and are the official delivery partner to the governments Start Up loans scheme and the Careers Transition Partnership (MOD). XFE have supported over 1,300 entrepreneurs to start their own businesses and has helped thousands more through training, events and mentoring provisions.


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