Businesses are being urged to take note of HMRC’s latest digital campaign, which aims to ensure that Income Tax Self-Assessment (ITSA) taxpayers do not claim tax relief on personal expenditure when completing their 2024/25 tax returns.
Following a successful trial in 2024 that generated over £27 million in additional tax revenue, HMRC has shared details of the campaign with the Institute of Chartered Accountants in England and Wales (ICAEW). The trial highlighted widespread issues with the reporting of disallowable private use within business expenses.
To simplify compliance, taxpayers can opt to use HMRC’s flat rate “simplified expenses” method to calculate allowable costs for motor vehicle use, working from home and private use of business premises.
Helen Marshall, Private Client Tax Manager at Burgis & Bullock, commented:
“HMRC will be opening enquiries to check that sole traders, partners and landlords only claim deductions for business-related expenses.
“This includes ensuring that mixed-use expenses are apportioned correctly between business and personal use, based on the specific circumstances of the tax year. The legislation states that for an expense to be tax deductible, it must be incurred wholly and exclusively for the purposes of the trade.”
Capital allowances are available for qualifying expenditure on plant and machinery, but adjustments must be made where there is personal use – most commonly with vehicles.
Repairs to business premises are generally deductible. However, if the work constitutes an improvement, the costs are considered capital in nature and should be disallowed.
Helen added: “If part of an expense is incurred for trade purposes, that portion is an allowable deduction. However, the method of apportionment must be supported by records – such as mileage logs -and applied consistently from one tax year to the next.”
For tailored advice on personal and business expenditure, contact Helen Marshall on 01926 451000 or speak to a member of the corporate tax team at Burgis & Bullock.
