HMRC’s digital blitz is catching sloppy expense claims—get “wholly & exclusively” right, split mixed-use costs, keep records… or expect a costly nudge.
⚠️ Quick Heads-Up: HMRC’s new digital crackdown pulled in £27m last year by catching dodgy expense claims. They’re now going after sole traders, partners, and landlords who:
- Claim personal costs as business expenses
- Forget to split mixed-use costs properly
- Think “wholly and exclusively” is just a vague suggestion
Keep solid records, be consistent, and check before you claim — or risk a friendly letter from HMRC (and by “friendly” we mean “costly”).
Apparently, HMRC has decided to roll out a shiny new digital campaign after a trial last year netted them a casual £27 million. Yes, £27 million — presumably enough to fund at least three new IT systems that won’t work.
The trial revealed what they politely call “disallowable private use in business expenditure.” Translation: people claiming for things that weren’t entirely business-related. Think “conference in Marbella” that suspiciously coincided with your niece’s wedding, or claiming the cost of a new sofa because you once read emails on it.
Now, HMRC says it’s going to be opening more enquiries into sole traders, partners, and landlords to check that only genuine business expenses are claimed — and that any mixed-use costs are correctly split between business and personal use. This applies to the 2024/25 tax return you’ll be filing and, if they find anything questionable, earlier years too.
The Rules (a.k.a. What HMRC Will Throw at You)
Expenses have to be “wholly and exclusively” for business purposes to be allowed. Sounds simple enough, but as ever with HMRC, there’s a bit more to it:
- If part of a cost is genuinely for business, you can claim that part — but you’ll need records to back it up (e.g., mileage logs, not vague memories of “loads of meetings”).
- You’ve got to apply the same apportionment method each year (no creative accounting just because your new car drinks more petrol).
- If the cost is capital in nature (i.e., buying or improving something rather than just maintaining it), it’s not deductible — but you may be able to claim capital allowances instead.
- Capital allowances also have to be reduced for private use. So if your van doubles as a weekend camper for Glastonbury, expect an adjustment.
- Repairs to your premises? Fine — unless it’s actually an upgrade, in which case HMRC will want to have a word.
There is a “simplified expenses” option for vehicles, use of home, and private use of business premises — handy if you’d like to avoid the faff of receipts and spreadsheets.
Usual Suspects for Private Use Adjustments
Here are the areas where people most often fall foul:
- Travel & Subsistence: Your everyday lunch isn’t deductible just because you ate it at your desk. Meals and accommodation are allowable for certain travelling trades or when you’re working away from your normal base.
- Vehicle Costs: Driving from home to your regular place of work is not business travel. HMRC calls it “ordinary commuting,” we call it “rush hour hell.”
- Use of Home: Claims are usually based on the number of rooms or floor space used for business. Your kitchen doesn’t count just because you had a Zoom meeting while making tea.
- Entertaining: Generally, no. Not even if you bought the good biscuits.
- Training Costs: Refresher and CPD courses are fine, but learning an entirely new skill or qualification is a no-go. In HMRC’s eyes, that’s personal benefit, not a business cost.
Our Advice
When in doubt, assume HMRC will ask you to prove it — and that their idea of proof is more than “but my mate Dave says it’s fine.” Keep records, be consistent, and don’t assume that “everyone else does it” will hold up in an enquiry.
If you’re not sure whether an expense will pass the “wholly and exclusively” test, ask us. It’s much easier (and cheaper) to fix things before you submit a return than after HMRC has taken an interest.
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