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.

Understanding disallowable expenses is crucial for companies for several reasons:

• Accurate tax reporting and avoiding penalties
• Maximizing tax efficiency
• Strategic financial management
• Maintaining financial transparency

At Perrys Chartered Accountants, our expert team of Corporation Tax specialists are highly skilled and experienced in all aspects of Corporation Tax and the execution of company accounts.

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:

• Client entertainment – This includes meals, drinks, tickets to events, and other forms of hospitality offered to clients, customers, or suppliers.
• Certain business gifts
• Personal expenses: This includes any expenses not solely incurred for the purpose of running the business, such as clothing or personal phone bills.
• Fines and penalties
• Loan repayments: Repayments of principal on loans, including personal loans and overdrafts, are not deductible. However, interest payments on business loans may be deductible.
• Fixed Asset additions: These are not directly disallowed, but instead benefit from capital allowances.
• Depreciation

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.

At Perrys Chartered Accountants, our expert team of Corporation Tax specialists are highly skilled and experienced in all aspects of Corporation Tax and the execution of company accounts. We are here to ensure that you keep your Corporation Tax liability to a minimum, whilst making certain that all aspects of your accounting are correct and compliant.