Company Expenses - Scott-Moncrieff

1 For an expense to be allowable for corporation tax purposes, it must be incurred wholly and exclusively for the purpose of the expensesThis means that the expense must be incurred for the purpose of enabling a person to carry on and earn profits of the trade. This definition is not always clear cut therefore this fact sheet aims to provide some guidance on the grey expensesUnpaid pension contributionsUnpaid employers pension contributions at the year-end are not allowable for corporation tax purposes. Tax relief is available in the year the payment is salary and employers national insuranceAccrued salary which remains unpaid 9 months after the year end is not allowable for corporation tax purposes. Tax relief will be available in the year the payment is and renewalsThe cost of repairs are usually revenue and allowable for corporation same rule applies for the like for like replacement of an item which is a subsidiary part of a larger asset, for example replacing a the situation where an improvement of the original item has taken place, for example a 2 piece bathroom suite has been upgraded to a 3 piece suite, this is not a revenue repair and should be treated as capital.

2 In this example, the bathroom suite is likely to qualify for capital allowances, so tax relief is still available on the an asset has been recently purchased and repairs are undertaken to restore the item to a usable condition, these repairs will be treated as capital entertaining is an allowable expense for corporation tax entertaining is not an allowable expense for corporation tax see the staff Expenses flowchart for further details and employment tax donations to local charities are allowable as a trading to national charities are treated as a charge on income. If the Company has taxable profits, a national donation will reduce the taxable profits. However, if the Company is in a making loss position, a national donation will not increase the and professional feesLegal and professional fees are not allowable if they have been incurred for a capital purpose or non-trading purpose, for example a Company reorganisation or architect s fees for building registrationsXPurchase/sale of propertyXTaking out a new lease (either short or long) XRenewing an existing lease (Short <50 years) XRenewing an existing lease (Long >50 years)

3 XTaking out options to lease land XValuation fees for purchase/sale of property XValuation fees for insurance cover/revaluation for accounts XCompany reorganisation XShare issue/share transfers etc XCompany purchase of own shares XEMI running costs XEMI set up grant of options XIncorporation costs XFinance raising (even for aborted expenditure) (but not a share issue)XPreparation of normal trade/service agreements XDebt collection XDefending title to fixed assets XDefending existing trade rights XEmployment advice XStamp duty XDue diligence work re potential acquisition/sale XRates review XPension advice XBuilding inspection for insurance purposes XArchitects fees re building work XFees for corporation tax enquiries which lead to amendmentsXDirector s personal tax fees (should go on P11D)

4 XDilapidation settlements XWebsite development if site not used for selling XObtaining licences XStructural engineer/building work XArchitects fees for repair work XArchitects fees for new building work XHealth & safety advice XReviewing Articles of Association/documents for AGM XLate filing penalty re Companies House XPlanning permission XCompany name change XA list of potential costs you may incur and their tax treatment is detailed fi nes for staff who have received a ticket whilst on work duties are allowable for corporation tax fi nes for Company Directors are not allowable for corporation tax submission penalties, for example VAT returns, corporation tax returns, Companies House returns, are not allowable for corporation tax can we help? For more information please contact:John WalkerTax Director Glasgow0141 567 O DonnellTax Manager Edinburgh0131 473