wholly and exclusively

for the purpose of the trade. This is defined in case law and the Revenue will look at whether they expense enabled the person to “carry on and earn profits” and also the “motive” for the expenditure.  Some expenses are clearly for the business:

• Direct costs and purchases which would include any goods or services bought which are subsequently sold on to customers.  The costs of changing them will also be included for example a manufacturing or carriage cost.
• Rent of premises – a unit on a trade park is unlikely to have any non-business element.  If you work from a part business/part personal premises including domestic home there are separate rules which will be covered in a separate article.
• Office costs – stationery, postage all allowable for the business
• Advertising – allowable for the business
• Telephone – dedicated business lines and mobile phones for employees all allowed.  Only business call costs are allowed if from a non business line.
• Subscriptions and publications – only for business purposes, ie trade memberships and journals
• Travel costs – specific business travel is allowed but not commuting to a regular workplace even if you work from home.
• Food – not generally allowed as you need food to live, not just for business
• Entertaining – while this is a business expense and should be recorded as such it is specifically disallowed for tax purposes
• Motor expenses – for company vans all treated as business, car costs deserve a separate article
• Professional fees – accountancy and legal fees generally allowable in full unless related to long term property rental or purchase.

The above list gives a picture of the types of expenses that can be claimed, but if you are in any doubt you should seek professional advice or speak to the Revenue.

Alastair Wood, AW Accounting  “speaking your language”

For businesses

• Small company corporation tax held at 21% for another year
• Extra 0.5% increase in NI from 2011 on top of  an increase of 0.5% in 2010 – this will raise £6bn in 2012
• Corporation tax rate on income from patents 10% to encourage innovation
• Empty property rate relief extended

For people

• Higher rate tax band to be frozen at £43k from April 2012
• Inheritance tax threshold held at £325k, not increased to £350k as forecast in April
• Over half additional revenue raised in PBR will from top 2% of earners
• State pension increase by 2.5%, this equates to 4% effective rate as inflation figure was  negative at review time
• Child and disability benefits increase by 1.5%
• £200 incentive to replace old/inefficient boilers
• Extension of free school meals
• Under 24s eligible for training after 6 months of unemployment
• Over 50s to receive more help to keep out of unemployment

The public sector

• Public sector pay increases limited to 1% from2011/12

Other headlines

• 50% levy on bank bonuses over £25k to discourage discretionary bonuses
• 50p per month tax on landlines to fund faster broadband
• Electric cars exempt from car tax
• Continued investment in creative technologies. Pharma and biotech will benefit most

Summary

It is a mixed budget with some across the board increases in NI, while trying not to stifle the economic recovery.  Big savings are being made in the public sector while trying to encourage green issues and innovation.  Many of the changes are post election and some a number of years away as the Government tries to get the country out of recession and at the same time repay the deficit.