How do I claim expenses?

Expenses are the costs incurred for business purposes. As there is no legal distinction between the owner and the business for unincorporated business the principle of reimbursing expenses does not apply. 

Sole trader / Partnership
For expenses to be allowable to the business, the expense must be incurred wholly and exclusively for the business i.e. incurred for the business, with no personal use. Where an expense has been incurred and there is mixed use i.e. private and business use, and can be apportioned on a relatively accurate business then the business portion will be allowed.

For a company, expenses that will not be treated as business expenses include any costs that do not meet the ‘wholly, exclusive and necessary’ definition. Exampes include a suit if you are a professional (as you could wear this for personal purposes even if you choose not to) or subscriptions for a magazine (where it is not necessary to perform your duties). Note that expenses must help you carry out your role, not help you perform your role better.

For the unincorporated, the expenses need to meet the ‘wholly and exclusive’ test.

Usually, a business will periodically ask you to submit an expense form and they will check and authorise these and then pay you directly into your bank. You must keep VAT invoices if the business wants to reclaim the VAT on your expenses.

If you are self employed all allowable expenses for the tax year will need to be calculated and the total amount is then included on your Self Assessment tax return. You don’t need to send in proof of expenses when you submit your tax return. However, proof and records of your expenses should be kept in case HM Revenue and Customs (HMRC) should ask to see them. Read more on the GOV.UK website here.

You need to keep all of your receipts, petty cash vouchers (to fill in when payments are made from the tin) and a record of the ‘top ups’ i.e. the amount to top petty cash up at the end of a period.