Allowable deductions for employee-related expenses

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

This guidance note covers the tax treatment of some common types of trading expenditure relating to employees. Some of these are disallowable under general principles, for example the wholly and exclusively test or capital versus revenue expenditure. Some are disallowed under specific statutory rules. For guidance on these, see the Adjustment of profits ― overview guidance note.

In this guidance note, unless otherwise stated, references to ITTOIA 2005 are relevant for sole traders / partners and references to CTA 2009 are relevant for companies.

Salaries and wages

The costs of employing staff is typically allowable provided it meets the criteria of being ‘wholly and exclusively’ for the purposes of the trade. This includes wages or salary, plus any benefits in kind.

Where remuneration is excessive, it is possible that a deduction may be challenged on the basis of not being for the purposes of the trade. This will normally only be applicable to remuneration of individuals who are connected to the business in some way.

When considering the level of remuneration, the whole package of remuneration,

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™

TAKE A FREE TRIAL NOW

Popular Articles

Owner-Managed Businesses

Relief for employee share schemes

Relief for employee share schemesRemuneration expenses are generally deductible for corporation tax purposes as they are considered to be incurred wholly and exclusively for the purposes of the trade. However, expenses relating to shares are usually classed as capital and are therefore not

14 Jul 2020 13:21 | Produced by Tolley Read more

Corporation Tax

Double tax relief

Double tax reliefWhen income arises in a foreign country to a UK resident company and that income is taxable in that foreign country, the UK may give the company relief for the foreign tax by crediting the foreign tax against the UK tax charged on that income. This might include withholding tax on

14 Jul 2020 11:31 | Produced by Tolley Read more

Employment Tax

Non-business expenses

Non-business expensesIntroductionIn 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

14 Jul 2020 12:16 | Produced by Tolley Read more

��Ƶ