Are accounting fees deductible?

25th November 2020

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The short answer to this is yes. The HMRC allows companies to claim a tax deduction for some fees that your accountant charges.

However, please bear in mind that due to the nature of accountants work, not all charges can be tax deductible.

Accountants offer a wide range of services to businesses, with most if not all businesses receiving help to complete company accounts and financial statements.

Accountants can help to set up companies, provide advice on the best legal structure, prepare business accounts. To reduce the dreaded annual tax bill what services such as the ones listed can a company actually claim against?

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Was the cost ‘wholly and exclusively’?

First things first when looking into whether or not the bill from your accountants is tax deductible, you need to ask yourself whether the cost for a specific service from an accountant was ‘wholly and exclusively’ incurred for trading purposes of your business.

This is one of the areas that the HMRC takes into consideration when decided whether or not corporation tax can be reduced for particular accounting services.

Typical accounting services and whether they can be claimed against

Below we have looked into the typical accounting services that businesses often receive and whether they can be claimed against.

  • Costs involved with setting up a business – costs involved here are normally pretty low, depending on the size of the business. Saying this, HMRC does not allow businesses to claim against this service. This is where it can get confusing. You can claim against the cost of starting a business as an expense, but you cannot use it to reduce your overall corporation tax.
  • Company tax return – you’ll be happy to hear that a company tax return is tax deductible. Where’s a funny meme when you need one? Tax returns and producing financial reports are both allowed! Filing accounts is a direct consequence of a company trading and therefore can be accounted for in the overall calculation of corporation tax.

Other Non-Tax-Deductible Expenses

The above are the typical services that most businesses opt for when hiring an accountant. Below are other expenses that unfortunately can’t be claimed against:

  • Asset depreciation – business assets often decrease in value rather than increase. Unfortunately, whether you own buildings or technology, loss of value through depreciation is unavoidable. It is because of this that depreciation and perceived losses can not be included on tax returns.
  • Shareholder dividends – money that is paid to a shareholder from a limited company can’t be claimed against as these payments contribute to personal financial gain.
  • Entertaining clients – it is often a misconception that entertaining clients whether its dinner or drinks is a deductible expense. It is not. Why? HMRC would argue that these conversations could happen in your office rather than an offsite location.
  • Customer gifts – sending gifts to clients is a great way to show appreciation and gifts don’t always have to be flowers, treats etc. it could be a month off not paying. Even though a great way to reward clients you can’t claim against these expenses. Saying this anything that helps to advertise your business e.g. branded wine can be.
  • Donations – not all donations are tax deductible, only those that are contributed through Gift Aid. Gift Aid is registered and approved by the government, as this stops businesses offsetting costs through privately owned non-profit organisations.
  • Legal fees – now this is a tricky one as some legal fees are deductible and some are not. Fees associated with loans, patents and trademarks are deductible. However, other legal fees e.g. share capital are not.
  • Fines and penalties – Business fines and penalties happen. Whether they are from the HMRC or other organisations, they cannot be claimed against. Rules are there to be followed. Businesses should not be breaking them and so not seen a necessary part of doing business and therefore can’t be claimed against.

What can you claim against?

You’ve properly reached this section of the blog thinking, “great the only thing I can claim against is a company tax return”. Whilst this may be true for accounting services there are many other business expenses you can claim against including:

  • Bad debts
  • Advertising
  • Bank charges
  • Workwear
  • Motoring expenses
  • Postage
  • Pension contributions
  • Seminars/events
  • Software
  • Training
  • Subscriptions to professional bodies etc.

The list goes on and on…

Are accountants worth the money?

Now, we may be biased as we are accountants, so of course we are going to say yes. However, head on over to our case studies page and have a read of what we have done for clients. See for yourself whether we are worth it or not… we are sounding like a loreal ad! Sorry!

When starting up and running a business, there are so many things that you have to do on a daily, weekly and monthly basis. Why not leave the boring admin side like updating your information with the HMRC, filing tax returns, completing company accounts, working out expenses etc. to an accountant? This frees you on doing the more exciting and rewarding things for your business, such as focusing on growing it, making sure customers receive the best service etc.

The team at RDG Accounting have many years of experience when it comes to this sort of stuff, they’ve seen it all, came up against challenges and worked with a range of different businesses. You are in very safe and capable hands!

In conclusion…

Bit of a formal way to end a blog with a conclusion. However, it’s always good to conclude what has been said and that is as a general rule of thumb, for businesses and claiming against corporation tax, if the cost was incurred because of the companies trading activity it can be included.

If unsure, always ask a helpful and friendly accountant, such as us! As we would be more than happy to answer any questions on this.

Whether you have just started a business, been trading for a while, or are coming up to your first year it’s always good to seek professional advice and guidance.

Having a chat with us won’t cost you a thing nor will you be tied into taking any of our services. Just use us for peace of mind or a friendly face who you can turn to if you need advice.

Simply fill in the form below and we will be in touch, alternatively call us on 0333 200 0714.

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