Home Rules Business Tax Allowable Expenses › Legal and Financial Costs
Claiming for Legal and Financial Costs

Not all legal and professional fees are deductible as business costs. This section lists those that are claimable and the important ones that are not.

PROFESSIONAL FEES: As a rule, you can claim for accountancy and legal fees as allowable expenses.

Some other professional fees also count as allowable business expenses if you are self-employed.

For example, you will be able to claim the costs for:

  • Hiring the services of accountants.
  • Professional indemnity insurance premiums.
  • Solicitors, surveyors, and architects (if used for business reasons).

But, you will not be able to claim for:

  • Fines that you receive as a result of breaking the law.
  • The legal costs of buying property and machinery. You can usually claim for these costs as capital allowances if you use traditional accounting.

Bank, Credit Card and Financial Charges

You can claim business costs for:

  • Bank, overdraft, and credit card charges
  • Interest on bank and business loans
  • Hire purchase interest
  • Leasing payments
  • Some alternative finance payments (e.g. Islamic finance)

Note: Repayments of loans, overdrafts, or finance arrangements do not count as allowable expenses. You can only claim up to £500 in interest and bank charges if you use cash basis accounting procedures.

Insurance Policy Premiums

As a rule all insurance policies for the business will be claimable. One of the most common would be public liability insurance.

If a Customer Fails to Pay

A ‘bad debt‘ is an amount of money included in turnover that the business will never receive. You can claim for bad debts if your business uses accrual basis accounting methods.

But, you must only write off these debts if you are certain they will not get recovered from the customer in the future. Even so, you cannot claim for:

  • Any debts if they are not included in the business turnover.
  • Any debts that relate to the disposal of fixed assets (e.g. buildings, land, or machinery).
  • Any bad debts that do not get calculated ‘properly’. For example, you cannot use an estimated debt amount (e.g. about 5% of the turnover).

If your business uses cash basis reporting you cannot claim for bad debts. The reason is because you only record income on the tax return when you actually receive it.

Legal and Financial Costs Claimable as Allowable Expenses in the United Kingdom