Are Accountant Fees Tax Deductible?
Whether you’re employed, self-employed or running your own business, you’ll need to stay on top of your accounting. If you don’t do this, you can end up overpaying your tax by missing business expenses that you could have claimed for.
At Mazuma we offer stress free online accountancy packages from just £32 plus VAT. But, do you also know that many accountancy services are tax deductible? The good news is that this can save you even more money in tax relief! Keep reading to find out more.
Cash for the savvy
When you want to be successful in business (and who doesn’t?), you need to be savvy with your expenses. That’s true whether you’re a freelancer, sole trader or small business owner or running an organisation, regardless of its size. If you can be tax efficient when claiming business expenses, you’ll reduce your profits on paper and that will reduce tax payments.
This is a simple way to keep your business tax efficient – it reduces your profit meaning that you won’t pay any more tax than you have to. To keep things really simple, contact Mazuma to see how we can help.
The rules
In general, for an item to be tax deductible, it has to be “wholly, exclusively necessary” for the business. Having said this, HMRC rules can seem pretty complicated and are often based on ideas such as whether expenses you claim are ‘fair’ or ‘reasonable’. There may also be an impact on the amount of personal tax you pay. Let’s see which aspects this applies to. Take a look at these examples to find out whether they are deductible.
Is it deductible? Yes or no?
Starting a company: Costs
No. HMRC allows you to include the cost of starting up your company in your expenses, but you’ll not be able to use it to reduce your corporation tax. This is because much of the accounting advice you received would have happened before you established the company, so it’s not deemed to be relevant to the company’s actual trading.
Completing the Company Tax Return
Yes. When we write your financial reports and sort out your company’s tax return, these activities are tax deductible. This is because in order to trade, your company is obliged to submit accounts each year. This means that we can calculate them when we deal with your corporation tax.
Self Assessment Tax Returns and Personal Tax Advice
No. You won’t be able to reduce your corporation tax by deducting accounting fees relating to your personal affairs. However, if the company has paid for these services during the year, we can add the amount back into your corporation tax calculations. This sort of expense is regarded as a ‘benefit in kind’. We’ll make sure that we include it in your documents so that you pay this tax personally.
Accounting and legal services
Yes. When you hire accountants, solicitors, surveyors and architects purely for business reasons, we can calculate that as a deduction. Another deduction is the cost incurred by your business for professional indemnity and insurance premiums. There are some items that are not deductible, including the legal costs incurred when you buy property and machinery. We can use traditional accounting to claim these costs as capital allowances.
