Other expenses and capital allowances

By Tolley

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

  • Other expenses and capital allowances
  • Business entertaining
  • Telephone benefits
  • Employee liability insurance
  • Homeworking
  • Capital allowances

Box 20 of the Employment supplementary page  to the Tax Return is a sweep-up for allowable deductions that do not fit into any of the other categories. This includes entertaining expenses, claims for business telephone calls and employee indemnity insurance. The box also includes capital allowance claims for qualifying capital assets purchased by the employee for use in the duties of his employment.

In September 2010, HMRC issued the ‘Expenses and benefits from employment toolkit’ , which is a guide for employers and their advisers on the risks associated with the end of year forms P11D and should help avoid common reporting errors. The toolkit is updated annually.

Business entertaining

Entertaining expenses are costs incurred by the employee in entertaining clients or fellow employees (including gifts) during the course of his duties of employment.

The basic principle is that no deduction is allowed for entertaining expenses, unless the conditions in (a), (b) or (c) are met:

  • a)the expenses are earnings in the hands of the employee and the amount was paid by the employer to the employee, or on his behalf, exclusively for the purposes of entertainment, and either:
    • the employer does not take a tax deduction from its profits for the entertaining, or
    • the amount is disallowed for tax as employer management expenses (where the employer is an investment management company) (ITEPA 2003, s 357; EIM32585)
  • b)the expenses are incurred for the entertainment of employees * (ITEPA 2003, s 358(1))
  • c)the expenditure relates to gifts provided to customers, suppliers and others (including, provided incidental to the provision to others, staff) as long as it incorporates a conspicuous advert for the employer and the value of the gift(s) given to the same person in the same tax

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