Tax Deductible Expenses
Helping you keep your tax bill down
Tax law says that an expense is deductible for tax if it is incurred ‘wholly and exclusively for the purposes of the trade or profession’.
If an expense is incurred for more than one purpose, i.e. business as well as personal use, a deduction for any identifiable proportion of the expense which is incurred ‘wholly and exclusively for the purposes of the trade’ is allowable.
So, when can I claim a tax deduction?
We have set out some of the types of expenditure that may be allowable. It should not be seen as an exhaustive list. What is allowable depends on the facts in each case.
What you can claim will depend on how you are being paid:
As a self employed locum, you are able to claim business expenses against your profits. This will reduce your tax bill.
The subscription costs we help our clients claim a deduction for on a regular basis are: MDU, MPS, BMA, GMS, RCGP.
An annual subscription to a body shown in the list approved by HMRC is allowable where either the subscription is paid by a self-employed individual or paid by an employee, and the activities of the body are directly relevant to the self-employment or employment.
Use this link to access the full list http://www.hmrc.gov.uk/list3/
Motor expenses can be claimed on a car which is used for business purposes. The expenses have to be apportioned so that only the percentage incurred ‘wholly and exclusively for the purposes of the trade’ are allowed.
Use of your home as your office
If you carry out work related to your locum activity from your home, you will be able to claim a tax deduction to cover the additional costs of working from home. There are several ways to claim. Some accountants use a fixed amount per week, while others calculate a claim using a percentage of the actual running costs of the home.
Many clients think that if they make this claim there will be a capital gains tax implication when they sell their home. This will not be the case as long as no part of the house is used exclusively for business purposes.
Many other types of expenses can be claimed by self employed locums. We provide our locum clients with detailed checklists and advice to ensure that all allowable expenses are claimed.
If you are a salaried locum, the tax deductible expenses you may claim are generally restricted to professional fees and subscriptions and possibly training costs.
If you work through an umbrella company, the company will advise you on what expenses are tax deductible. They will make this tax deduction claim on your behalf. The expenses claimed are usually very limited.
Limited company (personal service company)
Assuming IR35 does not apply to your limited company, the tax deductible expenses which can be claimed are similar to those listed below for self employed locums.
If IR35 applies to your limited company, the tax deductible expenses are very limited. If the ‘off payroll’ working rules are applied to your limited company no expenses can be claimed as a tax deduction.
Everyone finds keeping business records a chore. However, we find that compiling your business records as quickly as possible after the year end is the best way of making sure that a claim for tax deduction is accurate and as high as possible.
If you lose a business receipt, it may still be possible to make a claim for a tax deduction as you may have other evidence of the expense. However, it may be more difficult to justify a claim and may also mean that the expense is simply forgotten.
How we can help
We can advise clients on:
- Which expenses are deductible for tax.
- How to make the relevant claims.
- What percentage of a cost can be claimed as a business expense.