Non-business expenses

Produced by a Tolley Employment Tax expert

Employment Tax

Guidance

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Introduction

In order for an expense to be tax deductible it must be incurred because of an employee’s employment. Any non-business related expense is, therefore, not relievable except in some very particular circumstances.

This guidance note deals with three separate issues. The first is where an expense has both a business and private element. In this case some, or indeed all, of the expense may be allowable. The second case is where an expense must be treated as a non-business expense and is not deductible for tax purposes. The third is expenditure which appears on principles to be non-business yet qualifies as non-taxable, usually due to statutory provision or HMRC concession.

Dual purposes

In order to claim a deduction for tax purposes, the expenditure must be incurred ‘wholly, exclusively and necessarily in the performance of the duties of the employment’. This is discussed in the Expenses ― general rule guidance note. If an expense is not incurred for these reasons then it is disallowed.

However, despite the strictness of this test, it is understood that there are instances

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