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Allowable expenses for partnerships

A partnership is a business which is owned and managed by more than one person. The partners are jointly responsible for all aspects of the business and will share the profits. Partnerships will issue receipts and/or invoices for the work they have provided and can claim back expenses from the work they carry out.

What are allowable expenses?

All businesses will incur some form of expenses. The amount and type will vary from business to business. Expenditure must be “wholly and exclusively” incurred for trading (business) purposes for it to be claimed back for tax calculations.

Which expenses are allowable?

Here are some expenses which are allowable for tax purposes.

Expenditure Explanation
Cost of sales This may include goods bought for resale, or products used to provide a service.
Staff costs The costs of employing staff, including their wages and salaries, pensions and other employment related costs.
Premises costs The costs of using a building from which a business in run. This could include rent, rates, insurance, heat and light.
Motor and travel The costs of running motor vehicles and the costs incurred whilst working away from an office.
Administration These costs could include telephone, internet, stationery, printing, IT expenses and specific business insurance.
Professional This could include the services of an accountant and possibly legal advice.
Advertising The costs of promoting your business.

Which expenses are not allowable?

Below are some common examples of expenditure which is disallowable for tax purposes.

Expenditure Explanation
Capital expenditure and depreciation Capital expenditure is the purchase or improvement of fixed assets. Fixed assets are large items which are not bought to resell. For example, motor vehicles, buildings, office and computer equipment.  However, capital allowances may be available instead.
Depreciation is an accounting term (a provision), and it is a method of writing off the cost of capital expenditure over a period of time. 
Entertaining Client entertaining is not allowable.
Staff entertaining is allowable if incurred wholly and exclusively for business purposes, for example team building.
Donations Political donations and charitable donations to national charities are not allowable. 
Always keep a note of charitable donations as may be allowable elsewhere, as a gift aid payment on the individual’s self assessment tax return. 
Penalties and fines These are not allowable as they relate to breaking the law. 
 
Legal fees Legal fees relating to capital items or breaking the law are not allowable. 
Private expenditure Any private usage is not allowed,  this includes any amounts taken out by the owner(s).
If an expense which is used partly for business and partly for private purposes, the business part is still allowable.
 

What are simplified expenses?

Simplified expenses are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs, for example business mileage and working from home. 

Simplified expenses can be used by:

  • sole traders
  • business partnerships that have no companies as partners.

Simplified expenses cannot be used by companies or business partnerships which involve a company. You can read more on the GOV.UK website.

How do I claim allowable expenses?

Expenditure is deducted from income in the profit and loss account. The allowable expenses are included in the partnership’s tax return.

Checklist: What records do I need to keep?

The business records for expenses will vary from business to business. They must be retained for a minimum of six years. Login to save this checklist to your profile for future use – as you work through the list, any checkboxes that are ticked or unticked will be automatically saved to your profile. (To register to join and enjoy the benefits of membership click on the link at the top right of the page. It will only take a few minutes to create your profile).

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