Employment Tax

Expenses ― other taxes

Produced by Tolley
  • 18 Oct 2021 13:15

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Expenses ― other taxes
  • Interaction between expenses and other taxes
  • Expenses and corporate / business tax
  • Expense incurred
  • Incurred for the purposes of the trade
  • Wholly and exclusively incurred
  • Revenue and not capital in nature
  • Third party entertaining and gifts
  • Training costs
  • VAT issues and expenses
  • More...

Expenses ― other taxes

Interaction between expenses and other taxes

Expenses can affect a range of taxes including corporate tax, business income tax and VAT. As HMRC is likely to review expenses for multiple taxes, it is useful to highlight the main issues where other taxes may interact with employment-related expenses.

Expenses and corporate / business tax

The general rule for a business to make a deduction for tax (be that corporate or business income tax) requires four criteria to be met. The expense must be:

  1. incurred

  2. incurred for the purposes of the trade

  3. wholly and exclusively incurred

  4. revenue and not capital in nature

For a detailed consideration of these rules, refer to the Adjustment of profits ― overview guidance note.

Expense incurred

For all taxes, receipts should be obtained and kept as evidence that expenses are deductible, to be produced in the event of an HMRC enquiry. The requirement for receipts also assists to ensure that expenses claimed have actually been incurred.

Incurred for the purposes of the trade

In order to qualify for a dedu

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