To keep their tax bills down, self-employed builders and construction businesses can offset their expenses against their trading profit.

From specialist equipment to business travel, here’s a summary of what you can claim – and what you definitely can’t.

What are allowable expenses?

Before we get to some examples of allowable expenses, you need to understand what counts as an allowable expense in general – that way, you can work out whether something we didn’t include in the list can be offset against your profit.

Fortunately, there’s only really one basic principle behind what counts as an allowable expense: it is “wholly and exclusively” for business purposes?

In other words, if you bought something and use it partly for business and outside of work, it generally doesn’t count as an allowable expense (more on that later).

Common allowable expenses for construction businesses

It’s only right to start with the cost of protective equipment. Mainly because of the sheer number you have to buy in – steel-capped boots, hard hats, gloves, ear protectors, knee pads, hi-vis jackets and so on – they’re all deductible.

However, regular clothing – even something you only wear to work, like jeans – is not deductible. HMRC is quite explicit about this: “You cannot claim for everyday clothing (even if you wear it for work)”.

However, that doesn’t include uniforms, so branded polos, fleeces, etc., aren’t just good for promoting your brand but can also be deducted from your profits before tax.

You can also claim for small tools and equipment that you’ll use for less than a couple of years, like paintbrushes, screwdrivers and hammers.

Bigger, more durable items may also be allowable if you use cash-basis accounting rather than the accruals basis – also known as traditional accounting. If you’re unsure about this, give us a call – we’ll fill you in.

Then there’s fuel, which is one of the most common business expenses for construction. You’ve just got to be careful – you’re not allowed to claim for the cost of your journey to and from “your usual place of work”.

You can also claim for motor insurance and the cost of repairs as long as the vehicle is a dedicated work car or van.

If you’re part of the construction industry scheme (CIS) you’re able to reclaim for any costs relating to public liability insurance and union fees.

Partial claims

Earlier in the blog, we wrote that purchases “generally” don’t count as allowable expenses if they are used outside of work, but there are exceptions – your personal telephone, which you probably also use for work, is a perfect example.

The twist is that you can only claim for the cost of the item that relates to your work. Therefore, you need to make sure you’re making a reasonable claim and have the records to back it up.

Another example is using part of your home as an office – claiming all your utility bills wouldn’t be reasonable, but you can claim a percentage, which we would be happy to help you work out.

Every case is different

Claiming allowable expenses is a fiddly business. In a year, there can be so many to keep track of and complicated maths involved, especially for partial claims.

The best way to make sure you’re claiming everything you could be is for us to help you. You’d be surprised how big a job it is, and amazed how all those little things can add up to a hugely beneficial tax saving.

Get in touch for advice on allowable expenses for your construction business.

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