Tax Relief – Wholly and Exclusively Rejected

One of the more common questions we as accountants get asked is “Can I get tax relief on ……”? As often as not the question is asked more in hope than in expectation, as generally it is reasonably obvious what a business expense is.

In the absence of specific tax allowances for a particular item the starting point is always to consider whether the expense is wholly and exclusively for the purposes of the trade. To many people this may seem a bit vague and I have certainly had my fair share of “discussions” with HMRC on this very topic over the years.

This vagueness only applies in a limited number of cases however and there are lots of instances where the expense clearly fails to meet the criteria. HMRC recently released a press statement identifying five feeble efforts to get personal expenditure allowed as being for business purposes.

  1. “A three-piece suite for my partner to sit on when I’m doing my accounts”. Really it’s hard to know where to start with this one. Wholly for the purposes of the trade? I can’t think of a trade where this may even be close to qualifying (but I would love to hear suggestions!). Even were this test to be satisfied it is hard to imagine that nobody in the family sits on the suite at times when the business person is not doing their accounts. The “exclusively” part of the equation would therefore fail miserably.
  2. “Birthday drinks at a Glasgow nightclub”. Quite why HMRC felt the need to identify Glasgow as the city in question is a bit of a mystery. Birthday drinks at a nightclub anywhere in the country would have been similarly disallowable.
  3. “Vet fees for a rabbit”. Unless this was a guard rabbit and was kept outside roaming the yard in a state of constant aggressive readiness I would suggest that HMRC were correct in concluding that this was not wholly and exclusively for the trade.
  4. “Hotel room service – for candles and prosecco”. The exact purpose of this expenditure would probably depend upon who the candles and prosecco were for! In any case there is only one trade that springs to mind where the wholly and exclusively test may apply, but even there it is doubtful!
  5. “£4.50 for sausage and chip meal expenses for 250 days”. It is possible that HMRC were so concerned for this taxpayer’s health that they rejected the claim Although there are some circumstances in which genuine subsistence expenses can be allowable for tax I suspect that in this case HMRC simply did not believe that the claim was genuine.

These examples are at the extreme end of the spectrum and by working with our clients we can help ensure that none of their claims end up in future press releases.

Get in touch if you want guidance on what you can and can’t claim for.