Stop Sweating the Small Stuff: What Business Expenses Should You Really Be Claiming?

Stop Sweating the Small Stuff: What Business Expenses Should You Really Be Claiming?

One thing I’ve never really understood is why some business owners spend so much time trying to claim tiny personal expenses through their company.

A £4 coffee.

A sandwich on the way to work.

Lunch because you’ve gone into the office for the day.

Individually, we’re talking about tiny amounts of money. Yet some business owners seem determined to find a way of putting absolutely everything through the business.

My view is simple:

Don’t sweat the small stuff.

Claim legitimate business expenses, of course. But don’t waste your time trying to turn everyday personal expenditure into a business expense for the sake of saving a relatively insignificant amount of tax.

There are much bigger areas of tax planning to concentrate on.

Can I Claim My Coffee and Lunch as a Business Expense?

This is where confusion often arises.

Suppose you normally work from home but travel to your regular office. On the way, you stop at the station and buy a coffee and a sandwich.

Can you simply put them through the company because you’re going to work?

Generally, no.

The fact that you happened to buy your breakfast, coffee or lunch while travelling to your normal place of work doesn’t automatically turn it into a business expense.

We all need to eat and drink whether we’re working or not.

And ordinary commuting between your home and a permanent workplace isn’t normally qualifying business travel.

Trying to argue over whether a £5 coffee should go through the company simply isn’t where I’d want a business owner concentrating their attention.

Business Travel Is Different

There is an important distinction between ordinary commuting and genuine business travel.

Suppose you’re travelling to visit a client or attending a temporary workplace some distance away.

Perhaps the journey requires you to stay overnight in a hotel.

Now we’re potentially dealing with legitimate business travel and associated subsistence.

Reasonable costs incurred as part of qualifying business travel can potentially include things such as:

• Train fares

• Hotel accommodation

• Meals while travelling

• Other necessary travel costs

The precise tax treatment depends on the circumstances, so it’s important not to assume that every journey away from home automatically qualifies.

But there is a clear difference between buying lunch during your ordinary working day and incurring subsistence costs because you’re genuinely travelling for business.

Why Does It Matter?

You might reasonably ask:

What’s the big deal about putting a £5 coffee through the company?

Financially, probably not very much.

And that’s precisely my point.

Even if a £5 expense qualified for Corporation Tax relief, the actual tax saving would be tiny.

Is it really worth spending time arguing about it?

More importantly, routinely putting obviously personal expenditure through a business can create a poor impression if HMRC ever looks at the records.

If an HMRC enquiry uncovers numerous personal expenses being treated incorrectly as business expenditure, it may naturally raise questions about what else has been claimed.

I’d rather a client’s records were clean and easy to defend.

Claim Everything You’re Legitimately Entitled To

I’m certainly not suggesting that businesses shouldn’t claim legitimate expenses.

Quite the opposite.

If an expense has genuinely been incurred for the purposes of the business and satisfies the relevant tax rules, you should normally make sure it’s dealt with correctly.

Businesses shouldn’t voluntarily pay more tax than they need to.

But there’s a difference between sensible tax planning and trying to squeeze every possible personal purchase through the company.

Concentrate on the things that actually matter.

Look at the Bigger Tax-Planning Opportunities

Instead of spending time worrying about a coffee or sandwich, I’d rather discuss areas that could make a meaningful difference to your tax position.

Depending on your circumstances, these might include:

Pension contributions

Employer pension contributions can be an extremely valuable part of tax and remuneration planning for company owners, subject to the relevant rules and allowances.

Capital expenditure

If your business needs equipment, machinery or other qualifying assets, reliefs such as the Annual Investment Allowance and potentially full expensing can produce significant tax relief.

How you extract profits

For owner-managed companies, understanding the appropriate combination of salary, dividends, pension contributions and other methods of extracting value can be much more important than arguing about minor expenses.

Timing expenditure

There may be situations where bringing forward or delaying genuine business expenditure can affect when tax relief is obtained.

Business structure

As businesses grow and circumstances change, it’s worth periodically considering whether the existing structure remains appropriate.

These are the areas where proper tax planning can potentially save thousands of pounds, rather than pennies.

Don’t Let Tax Drive Bad Decisions

There’s another principle I think business owners sometimes forget.

Don’t spend £100 simply because somebody tells you you’ll get tax relief.

Tax relief doesn’t normally mean HMRC gives you all your money back.

If you spend £100 unnecessarily simply to obtain a tax deduction, you’re still likely to be considerably worse off than if you hadn’t spent the £100 in the first place.

Make commercial decisions first.

Then make sure those decisions are implemented tax-efficiently.

Keep Your Business and Personal Spending Separate

For owner-managed businesses, I’d encourage a simple discipline:

Keep personal expenditure personal and business expenditure business.

That makes the bookkeeping cleaner.

It makes your accounts easier to prepare.

It reduces the number of questionable transactions your accountant needs to investigate.

And if HMRC ever enquires into the business, your records should be much easier to explain.

Your limited company isn’t simply an extension of your personal bank account.

The Bottom Line

Don’t become obsessed with claiming every £5 coffee, sandwich or other small personal expense through your business.

If something is a genuine business expense, claim it.

If it’s clearly personal, pay for it personally.

And if you’re not sure, ask your accountant.

But concentrate most of your tax-planning efforts on the areas that can actually make a meaningful difference — things such as pensions, capital expenditure, profit extraction and the overall tax structure of your business.

Good tax planning isn’t about trying to get every cup of coffee past HMRC.

It’s about understanding the rules, claiming what you’re legitimately entitled to and concentrating on the decisions that actually matter.

This article provides general information only. The tax treatment of travel, subsistence and other expenses depends on the particular circumstances, including whether a workplace is temporary or permanent.