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Deductible Business Expenses

Zia & Co > Accounting  > Deductible Business Expenses

Deductible Business Expenses

Business Expenses – don’t we love them!

In fact, many people love them so much because they think they get something for free. That’s a big mistake because business expenses still come out of the business’ pocket. Neither are they taken ‘off tax.’ Rather, it’s taxable (gross) income and revenue that are reduced by the amount of the expenses. Tax is then calculated on the smaller final amount.

Another general confusion seems to persist around two different types of expenditure, Capital Expenditure and Revenue Expenditure. Capital expenditure, such as equipment, computers, machinery, fixtures and fittings, is not a deductible business expense but is treated separately as Capital Allowance as it usually involves acquiring or creating an’ asset of enduring benefit.’ Revenue expenditure, on the other hand, reflects the day-to-day running costs of the business.