As a recruitment agency owner, there are many expenses incurred in running your company that may be allowable by HMRC, provided they meet the definition of being “wholly, exclusively, and necessarily incurred” for business purposes.
These allowable expenses can be offset against profits, reducing the company’s Corporation Tax liability.
However, there are common misconceptions around what qualifies as an allowable expense. Below are examples of costs that typically cannot be claimed by a recruitment business:
UNIFORM
Within the recruitment industry, there is generally no required uniform. While dress codes have relaxed over time, even traditional business attire such as suits has never been classed as allowable by HMRC. Therefore, the purchase of suits or everyday work clothing is not an allowable business expense.
Exceptions include:
- Promotional clothing for trade shows or networking events displaying the company name and/or logo
- Safety equipment required for client site visits (e.g. hard hats, hi-vis jackets, steel toe-cap boots)
- Uniform provided to temporary workers for on-site roles (e.g. nurse’s tunic, doctor’s coat)
GOLF MEMBERSHIP
Golf courses can be valuable for networking with clients and suppliers, particularly where there is shared interest. However, paying for a golf membership through the business is likely to be treated as a benefit-in-kind, resulting in additional personal tax liabilities.
If a director uses a personal golf membership for client entertainment, it is advisable to apportion the cost and claim only for the days when it is used strictly for business purposes.
PACKAGE HOLIDAYS
When travelling to visit clients overseas, costs such as flights, accommodation, subsistence, and client entertainment are allowable.
However, combining a client visit with a personal or family holiday and attempting to claim the full cost is not advisable. HMRC may view this as a personal expense.
To avoid issues, ensure all business-related costs are clearly itemised and separated from any personal expenditure.
MONTHLY OR ANNUAL TRAVELCARDS
HMRC allows claims for travel undertaken for business purposes, such as visiting clients, candidates, suppliers, or attending networking events.
However, commuting to and from your usual place of work (e.g. your office) is not allowable.
Purchasing monthly or annual travelcards through the company may be seen as covering both business and personal use. It is therefore advisable to either purchase travel for individual business journeys (e.g. day tickets) or claim only the proportion of travelcard costs relating to business use.
CAR COSTS ON PERSONAL VEHICLES
When using a personal vehicle for business, the only allowable claim is business mileage at HMRC’s approved rates.
These rates already include fuel, insurance, servicing, road tax, and general wear and tear. As such, additional claims for these costs are not permitted.
HOME IMPROVEMENTS
While recruitment agencies can operate from home and claim a fixed working-from-home allowance (currently £26 per month), the property itself is not owned by the business.
Therefore, costs such as renovations, decoration, or structural improvements are not allowable business expenses. This also applies to permanent office structures built on personal property.
An exception may apply where:
The individual personally funds groundwork (e.g. a concrete base), and a temporary structure (e.g. a portacabin) is purchased by the company as a business asset. In this case, the structure remains a company asset and can be relocated or sold if the property is sold.
When claiming expenses, it is essential to retain receipts, invoices, and supporting bank records. Using digital accounting software to store and organise this information is strongly recommended.
MAYACHI has a comprehensive understanding of allowable expenses within the recruitment sector and provides expert guidance in this area. By working closely with agency directors and their accountants, MAYACHI ensures expenses are recorded correctly and tax efficiency is maximised.