Business Expenses – Unbelievable? A barrister claimed her robes as a business expense as it was required to be worn as part of the court dress code. HMRC took a different view and disallowed the robe as a business expense as it had an intrinsic duality of purpose. HMRC argued that the robe also provided warmth and decency and therefore had a duality of purpose. So it could not be claimed as a business expense!

However, in a recent case, a different decision was made.  A scrap metal business was caught in an undercover police operation. Stolen goods were offered to the business to buy. Criminal charges were brought and legal costs of £500,000 were incurred. The business claimed the legal costs against their profits and argued they were business expenses for the purposes of the trade.

HMRC, not surprisingly, took a different view and sort to disallow them on the basis that it had intrinsic duality i.e. the expenditure was incurred to keep the business owners out of prison and defend their personal reputation to continue to trade. Therefore the costs were incurred to defend personal and business reasons.

However, the costs were allowed on the basis that defending their position was essential for the business to continue to trade. If they had lost then the business would have had to close.

Summary Business Expenses – Unbelievable?

If an expense has an intrinsic duality where it is impossible to show one part is business and the other is, say, personal, then HMRC is likely to disallow the expenditure. However, where the business part can be quantified you may be able to obtain a partial deduction. Also, if the personal element is negligible then you may be able to deduct the whole expense. Always check the main reason for the expenditure!