In order to determine whether sponsorship and subscriptions can be deducted, it is necessary to carefully consider whether the “complete and exclusive” criterion is met. HMRC believes that subscriptions for general charitable purposes or to political parties are rarely made “wholly and exclusively” for the purposes of society, so deduction is not permitted. This excerpt is from the brand new report “Maximizing deductions for business expenses”. Sarah Bradford explores how the comprehensive and exclusive rule works for businesses. The last important area of risk highlighted in the toolbox is entertainment, gifts, subscriptions and sponsorships, recalling the general principle that (with some exceptions) deduction for this type of expenditure is expressly excluded, whether entirely and exclusively for business purposes. In principle, a deduction is allowed for expenses incurred entirely and exclusively for business purposes. The rule prohibits expenses that are not wholly and exclusively incurred in this manner and states: “When calculating the profits of a transaction, no deductions are allowed – expenses that have not been incurred entirely and exclusively for the purpose of trading.” Unlike the corresponding regulations for personnel costs, it is not necessary that the expenses are “necessarily” incurred. This means that as long as an expense is incurred for business purposes and only for that purpose, a deduction will be allowed. Expenses do not have to be incurred for them to be deductible. The rules for claiming expenses on your earned income are very strict. The general rule is that they must be “complete, exclusive and necessary” in the performance of your duties. This means that each person in your role would have to bear the costs and that the expenses would be incurred while performing your duties, rather than putting you in the position where you can perform those duties.

Since 6 April 2016, operating cost rules have been simplified, meaning your employer does not have to report these expense payments to HMRC if they are valid business expenses. Therefore, you do not need to take any further action. To be deductible from remuneration, an expense must be wholly and exclusively incurred in the performance of the tasks of the employment relationship. The words “complete” and “exclusive” prevent the deduction for expenses that serve a dual purpose, a commercial purpose and a non-commercial purpose. The full and exclusive rules do not apply to travel expenses. In principle, a deduction is allowed for expenses incurred entirely and exclusively for The toolkit recognises that the treatment of travel and subsistence expenses can be complex. While travel expenses incurred by a business owner are often incurred solely for business purposes, there may be circumstances where the expenses appear to have a business element but are not fully deductible (for example, if there is also a personal item). The toolkit highlights the need to consider all facts in determining whether a deduction is available for travel expenses. If you are not required to work from home, but you regularly work from home after consultation with your employer, this is called a work from home contract. These agreements do not need to be written and do not apply to all employees, but the tax rules applicable here are different from those that apply when an employee is hired specifically on the basis that they will work from home. The “complete and exclusive” criterion can only be fulfilled if the sole reason for the expenditure incurred is for the purposes of the activity concerned. To determine whether this is the case, there are two things to consider, one of the legal issues and the other of the facts.

Exceptions to this rule include the cost of employee receptions (not, for example, customer or supplier receptions) and small gifts, including advertising. `Where expenditure is incurred for more than one purpose, this Section shall not prohibit the deduction of part or an identifiable part of expenditure wholly and exclusively for commercial purposes.` If your employer does not reimburse your expenses, it should be noted that if your hourly wage is equal to or close to the minimum wage, an element of protection is enshrined in national minimum wage regulations. This applies if an employee incurs employment-related expenses that are not reimbursed by an employer.