Treatment of non-deductible expenses with no personal usage?

Treatment of non-deductible expenses with no...

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Look at the typical high flying tech industry office and you'll see all manner of gizmos. Giant fish tanks in reception, TVs and consoles for staff to play on, elaborate furnishings.. all things that don't generally seem to be "wholly and exclusively" for the "purposes of the trade".

Let's say I fancied having a few similar things at my far smaller and humble business and wanted a flashy TV for staff and visitors to enjoy, perhaps a game console, a fish tank, whatever.

By my reckoning, these are disallowable expenses in relation to corporation tax, but is it still okay for the business to buy them with no other tax liabilities remaining? The reason I ask is because such things are not specifically for an individual staff member so working out a BIK would be tricky (say there were 8 employees.. are you expected to divide the price of an office TV/games console or fish tank amongst them somehow?) What is the general treatment in situations where non-deductible expenses are incurred by a business on things HMRC might consider frivolities?

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By [email protected]
15th Jan 2014 11:21

PSA

Hi

Look into the PSA on HMRC website and pay the tax on the employees behalf.

http://www.hmrc.gov.uk/payerti/exb/schemes/psa.htm

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By Steve Kesby
15th Jan 2014 11:32

They're not deductible...

... because they're capital. Capital allowances may be available.

Capital allowances won't be available for items that are wholly aesthetic, like the fish tank, unless there's a trade need for it (such as in pubs, restaurants and hotels, etc.).

Capital allowances (including AIA) will be available for things that have a function in the business (like keeping the hired help amused at lunchtime), but will be restricted to the extent that they are used for entertaining visitors.

Wholly and exclusively isn't a concept that features for capital allowances purposes.

There is no benefit in kind for the provision of recreational facilities if they are available to employees generally, aren't available to the public generally, and are provided on non-domestic premises. All of those boxes appear to be ticked.

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Replying to Accountant A:
Euan's picture
By Euan MacLennan
15th Jan 2014 12:14

Fish tank

Steve Kesby wrote:

Capital allowances won't be available for items that are wholly aesthetic, like the fish tank, unless there's a trade need for it (such as in pubs, restaurants and hotels, etc.).

Do you mean that you could not claim capital allowances for a tank with pretty tropical fish in it, but you could claim for the same tank if it had crabs and lobsters in it for serving to customers?  Is this a good tax planning point?

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