This seems like a simple question. However, particularly at this time of year as they submit their tax return, many people find out that what they thought was a business expenses, isn’t.
The answer to the question is not defined by you, but by the tax office.
Take your telephone bill as an example. The tax office is happy to accept a telephone bill, even a mobile phone bill, as a business expense if you are a limited company, but not if you are self employed. If you are self employed and have a mobile phone, the tax man will assume that the contract is mainly for personal use. To prove your business use you need an itemised phone bill and details of which calls were for business, and which were personal.
Another area that often causes confusion is food and drinks (entertaining). Meals and drinks bought by a limited company can usually be called a business expense, but only very rarely if you are self employed.
If you are unsure about what is or isn’t a business expense, ask a professional, and then make sure that you understand what they tell you. I heard a story recently about someone who thought they knew what was allowed, only to find that their accountant had disallowed some items on their tax return (and not told them).
The logic behind the tax office’s decision on what is (and isn’t) a business expense may be archaic or confusing, but when the tax man knocks on your door and asks to see your accounts, the argument becomes irrelevant, as all that matters is the law.
If you would like to know more, or have questions, please ask.
We have much to thank Donald Rumsfeld for. Although mocked for his listing of “what he knew he knew”, “what he knew he didn’t know”, etc, this analysis of your situation can often distinguish perception from reality.
Compiling a list of things that you know you know about your business might seem like a waste of time, but put it beside a list of things you don’t know about your business, and you might surprise yourself just how many things you suspect, but aren’t sure about.
If you aren’t sure about it, then you don’t know it.
And then ask yourself, what are you doing to find out?
Great question raised this morning at the Birmingham Social Media Cafe – “Do you value your time?”
It sparked an interesting debate about the perceived value of your time. Do you give it away freely? Do you calculate free-time in terms of lost opportunity? Is your time worth more or less to you than to your clients?
In a service sector, time is what I sell. If I am not charging for it then by default I am giving it away. How much can I afford to give away before I start to devalue it?
As ever, it’s a compromise. I need to give a bit away to “show what I’m selling”. The time that I choose to invest in networking needs to have some ROI.
I was reminded today that time spent with some people is priceless.
If your business has social enterprise objectives, then Business Link in the West Midlands has a limited time in which it will contribute towards the costs of business strategy, or process development, focusing on how the business will move forward to financial sustainability and move away from grant dependence.
In a nutshell, Business Link will pay 80% of the cost.
Interested? Let me know, and I’ll do what I can to help.