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Newsletter issue - December 2009.
Certain MPs got into hot water recently for including the cost of preparing their personal tax returns in their expense claims. Employees and company directors, including MPs, are not permitted to claim the cost of personal tax advice, or the cost of preparing their personal tax return as a deduction from their taxable income. If those costs are born by their employer, the cost should be treated as a benefit in kind, reported on the form P11D and taxed accordingly.
Where an individual runs his own business as a sole-trader, his personal tax return must include details of the turnover, expenses and profits of his business. The cost of preparing and completing that part of the tax return is tax allowable as that cost relates to the business and not to the individual's personal affairs. Where the remainder of the personal tax return requires little effort to complete the Taxman will, by concession, allow the whole of the cost of preparing the sole-trader's tax return to be treated as a tax allowable business cost.
