One of the most common questions we get from limited company directors is some version of: “Can I put this through the company?” The answer almost always depends on a single test — and if you understand that test, most expense questions answer themselves.

The test is called the wholly and exclusively rule. HMRC’s position is that an expense must be incurred wholly and exclusively for the purposes of the trade to be deductible against your company’s profits. If there’s any personal element to it, the picture changes immediately. That’s where most of the confusion with allowable business expenses for limited companies sits — not in the straightforward cases, but in the ones that straddle business and personal use.

Below we work through the categories that come up most often, what qualifies, what doesn’t, and where there’s genuine room for a proportionate claim.

HMRC’s legislation disallows any expenditure that wasn’t incurred wholly and exclusively for the purposes of the trade. That wording matters more than it might seem. It’s not enough that something was useful for the business, or that you used it during working hours. If there was also a personal purpose behind the expense, HMRC can refuse the deduction entirely.

The case law here is fairly settled: where dual purpose can be identified, the entire cost is disallowed. There’s no automatic 50/50 split. The one concession is apportionment — where a cost genuinely has a separable business element and a separable personal element, you can claim the business proportion. But “separable” is doing a lot of work in that sentence. HMRC expects you to be able to clearly demonstrate where one ends and the other begins.

There’s also an important nuance in the other direction. If an expense is genuinely wholly for business purposes but produces an incidental personal benefit, that benefit alone doesn’t kill the deduction. An example: your company pays for specialist software that you happen to enjoy using. The enjoyment is incidental; the cost still qualifies. The test is about purpose, not about whether any personal benefit arose at all.

Understanding this rule upfront makes the rest of the expense categories much easier to navigate. Most disputes with HMRC come down to directors claiming costs where they can’t actually demonstrate the business purpose was the only purpose.

For the majority of operating costs, the position is relatively clear. These are the revenue expenses that most limited companies run through their accounts without issue:

• Office and workspace costs — rent, rates, utilities, and maintenance on dedicated business premises. If you’re working from home, this gets more complicated (see below), but a proper office is straightforward.
• Staff costs — salaries, employer’s National Insurance, pension contributions, and staff training costs where the training is relevant to the role.
• Professional fees — accountancy, legal advice, and other professional services incurred for the business. That includes your accountant’s fees, obviously.
• IT and software — subscriptions, equipment, and software used for the business. Cloud accounting software, project management tools, communication platforms — all of these are normal operating costs.
• Business travel — public transport fares, taxi costs, parking, and mileage at HMRC’s approved rates (45p per mile for the first 10,000 business miles in a tax year, 25p per mile thereafter, if you’re using a personal vehicle). Commuting to a permanent workplace doesn’t count as business travel — that’s a personal expense regardless of how you structure it.
• Marketing and advertising — website costs, paid advertising, printing, and similar promotional expenditure for the business.

These are the easy ones. Where things get more interesting is in the categories where personal and business use overlap.

Several categories come up repeatedly with directors who’ve made claims they shouldn’t have, or missed claims they could legitimately make.

Home office costs

If you work from home and your company doesn’t pay rent on a separate office, there are two routes. A flat-rate allowance through a use-of-home agreement between you and your company, or a proportionate claim based on actual business use of the property. The proportionate route needs a defensible calculation — floor area used for business, hours worked at home as a proportion of total hours, utility costs apportioned accordingly. It’s worth doing properly rather than guessing.

Mobile phones and broadband

HMRC accepts that a mobile phone contract held in the company’s name can be claimed as a business expense even if you use the phone personally — because personal use is considered incidental. But broadband is treated differently. If your home broadband predates your business use, HMRC treats it as a dual-purpose expense and disallows the whole cost. A separate, dedicated business broadband line is a cleaner position.

Clothing

Ordinary clothing worn for work is disallowed — even if you only wear it for client meetings. HMRC’s view is that clothing also serves the personal purpose of keeping you dressed. Protective workwear and specialist uniforms (branded, not generic) are a different matter.

Client entertainment

This one isn’t a grey area — it’s simply disallowed. Entertaining clients is not a deductible business expense for Corporation Tax purposes, regardless of the commercial intent behind it. Staff entertaining (within limits) is treated differently, but client hospitality has been explicitly excluded by HMRC.

Not all business costs work the same way. Revenue expenses — the day-to-day running costs of the business — reduce your profit directly in the year they’re incurred. Capital items work differently.

When your company buys something with a longer useful life (equipment, machinery, vehicles, computing hardware), that cost is treated as a capital purchase and dealt with through the capital allowances regime rather than as an immediate deduction. The Annual Investment Allowance (AIA) lets most companies deduct up to £1 million of qualifying capital expenditure in the year it’s made, which means for the vast majority of small limited companies, the practical effect is the same as an immediate deduction. But the mechanism is different, and it matters for how you categorise the spend in your accounts.

Vehicles are worth mentioning specifically. Company cars carry their own tax treatment — both for Corporation Tax and for benefit-in-kind purposes if the director also uses the car personally. The tax efficiency of a company car depends heavily on the vehicle’s CO2 emissions, and the answer has shifted meaningfully over the past few years as benefit-in-kind rates have changed. If you’re considering a company vehicle, it’s worth running the numbers before you commit rather than assuming it’s the obvious choice.

The key takeaway is that the question “can I put this through the company?” doesn’t just have a yes/no answer on qualification — you also need to consider whether it’s a revenue expense or a capital one, because they’re handled differently.