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HMRC internal manual

Business Income Manual

Deductions - scope of: apportionment of expense

S34(2) Income Tax (Trading and Other Income) Act 2005, S54(2) Corporation Tax Act 2009

The rule prohibiting a deduction for expenditure not incurred wholly and exclusively for the purposes of the trade does not prohibit a deduction for any identifiable part or proportion of the expense which is incurred wholly and exclusively for trade purposes.

Examples of expenses part of which may be regarded as allowable are the running etc costs (including hire-purchase interest) of a car used partly for business and partly for private purposes and the cost of rates, lighting and heating of premises used partly as business and partly as private accommodation.

For detailed discussion of the apportionment of expenses where there is an identifiable part or proportion which meets the ‘wholly and exclusively’ test see BIM37600 onwards.

As regards:

  • expenses of a farmhouse etc, see BIM55250 - BIM55260,
  • entertaining expenses, see BIM45000 onwards,
  • UK residents travelling abroad for the purpose of their trade, see BIM47710 and BIM42525,
  • the deduction for business rates, see BIM46835 and for the Council Tax, see BIM46840,
  • the new simplified expenses rules from April 2013, see BIM75000 onwards.