Disallowable expenses for Corporation tax

Disallowable expenses are expenses that cannot be deducted from a company’s profits for corporation tax purposes. This means that they will not reduce the amount of corporation tax that the company must pay.

Examples of Allowable Expenses for Corporation Tax

  • Staff entertainment – not client related.
  • Capital allowances – for the effective depreciation of certain qualifying assets.
  • Loss on disposals of fixed assets.
  • Repairs – This includes expenses on repairing assets, such as buildings, plant, and machinery. As long as there is no major enhancement of the item.
  • Customer debts – This includes bad debts that are written off, i.e. if the debt is no longer recoverable.
  • Company bank loan interest.
  • Accrued salary and wages provided these are paid within 9 months of the year-end.

What cannot be claimed as a Corporation Tax deduction?

List of expenses that a Corporation Tax deduction is not permitted:

Certain legal fees – legal fees for personal matters and those not relating to normal trading activities.

Depreciation

Loan repayments

Client entertainment – e.g. meals, drinks, tickets to events etc.

Business gifts given to clients.

Fines and penalties

The above relates to specific examples, if you would like to discuss further please get in touch with our team.

It is important to note that the rules on disallowable expenses can be complex and may change from time to time. Please check with the team at Perrys Chartered Accountants in London or Kent regarding any item not specifically listed or anything else you may be unsure about.