Self employment - legitimate expenses

Isatou

In light of all the news about MPs expenses, I wonder what be considered as legitimate expenses? In our partnership (dairy farm - husband and wife) we claim for tea, coffee, loo rolls, fuel etc, but wondered where you draw the line?

PlutoinCapricorn

A dairy farm is a very long way from a home-based research service, and having a business is more complicated than being a sole trader is. I guess that you have a lot of equipment and expenses that would not apply to a desk-based consultant.

However, the principles are similar: what expenses would you not have if you went out to work as an employee 5 days per week? What have you bought specifically for your business, how much more electricity are you using? Conversely, what would you be paying for anyway? Could you prove that something was necesssary for your business if necessary?

I am sure that there are acceptable/not acceptable lists for businesses such as yours.
Are there any trade papers that might help: I am sure that there are not many dairy farmers on this forum?

fengirl_2

MP's are employees and the rules on expenses for employees are far tighter than for businesses. An employee can only get a dedcution for expenses incurred wholly exclusively and necessarily in the perfomance of the duties and these rules are rigidly applied. You can imagine that the allowable expenses would be very limited.
However, for a business, the law only states that an expense must be incurred wholly and exclusively for the earning of the profits - they dont have to be 'necessary' becasue everyone runs their own business as they see fit. For instance, I might advertise my business but because not all business choiose to advertise, this does not bar my claiming advertising expenses.
The expenses you have described are personal to you and your wife - you need to eat, drink and go to the loo whether you work or not. They would therefore be disallowed should you ever be investigated. However, if HMRC found no other errors in your records I wouldnt envisage them asking you to pay the extra tax as this would be extremely minor. If you have employees you can, of course provide these items for their use and claim a deduction as they would be expended in the course of business (eg the workers cant go home to use the loo!). If you own use of these items was incidental to emploees' use then, again, I think they would be overlooked.