20 November 2017
Barrister accounts FAQs: What expenses can I deduct?
This article, from our series of blogs on Barrister accounts, looks at expenses incurred and what can be deducted within your accounts.
The tax legislation from HMRC states that you can claim: “All expenses incurred wholly and exclusively for the purpose of trade”.
As a Barrister, what does this mean in practice?
You are able to deduct a number of expenses in the course of your work:
Wig and gown, detachable court collars and the laundry of such items is business. After the Mallalieu v Drummond case it was confirmed that other clothing was necessary for decency and was not allowable. However, VAT and Income Tax are different and HMRC will permit VAT to be recovered on dark court suits as required to be worn in court. See www.gov.uk – ref. VIT 43800.
Costs from motoring must be allocated between business and private use. Ideally a log should be kept. Home to Chambers is private mileage, even if you work predominantly from home.
VAT treatment is that no VAT on the acquisition of a car may be reclaimed, but 50% of the VAT can be reclaimed on car leasing.
Salary for support:
If your spouse or partner assists you by collecting briefs, chasing debts, keeping your records or researching the law, then a salary may be paid. The salary has to be what you would pay on the open market and would be a fully deductible expense.
Phones are an essential business tool but, strictly, there is a private allocation to disallow for income tax. However, with contracts often giving “free minutes” it is not always possible to estimate an additional cost for private use.
Other essential business items including computers, printers, office furniture such as a desk and chair are given tax relief through the capital allowance scheme.
If you are working away from home then hotel and meals are allowable costs.
Working from home:
If you work from home then HMRC will allow a “Use of Home as Office” charge. They will always permit £4 per week as in their guidance, but many barristers work extensively from home and a much larger allowance may be claimed.
Bank interest is a deductible expense if it is on a business account and is not funding personal expenditure. Funding debtors and work in progress will normally be allowable.
Planning point – If you have large debtors then you might borrow against these to fund car purchases or even part of your mortgage; two areas where little or no tax relief is normally available. Interest rate differentials need careful assessment.
For more information download our helpful guide to Barrister accounts and taxation.
Want to know more about what expenses you can deduct as a Barrister?
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