When managing a buy-to-let (BTL) investment company, understanding which expenses are tax-deductible can significantly impact your bottom line. Investors often question whether trading expenses, such as mobile phone bills and traveling costs, qualify as allowable deductions. This blog aims to clarify these aspects, focusing on the UK tax framework.

Understanding Allowable Expenses for Buy-to-Let Companies

Buy-to-let companies typically generate income through property rental rather than traditional trading activities. HM Revenue & Customs (HMRC) distinguishes between “revenue expenses,” which are day-to-day operational costs, and “capital expenses,” related to acquiring or improving property. Only revenue expenses wholly and exclusively incurred for the purpose of the rental business are deductible.

Mobile Phone Expenses

Mobile phone costs can be allowable if they are directly related to managing rental properties. For example:

• Allowable: Calls made to tenants, contractors, letting agents, or suppliers.
• Non-Allowable: Personal calls or a portion of the bill not related to the rental business.

Tip: If you use the same phone for both personal and business purposes, you must apportion the expense based on actual business usage.

Traveling Expenses

Travel expenses are another common area of confusion. HMRC allows deductions for travel costs incurred wholly and exclusively for the rental business. This includes:

• Allowable: Trips to inspect properties, meet with tenants, attend property-related meetings, or liaise with contractors.
• Non-Allowable: Commuting from home to an office (if applicable) or travel with a dual purpose (personal and business) unless the business element can be clearly separated.

Tip: Keep detailed records of mileage, dates, and the purpose of each trip to substantiate your claims.

Key Considerations

1. Wholly and Exclusively Rule: Expenses must be incurred solely for the rental business.
2. Accurate Record-Keeping: Maintain receipts, logs, and clear documentation to support your claims.
3. Apportionment: For mixed-use expenses, calculate the business-related portion accurately.

Conclusion

While mobile phone and traveling expenses can be allowable for a buy-to-let investment company, the key is their direct connection to the rental business. Proper documentation and adherence to HMRC guidelines are crucial to ensuring these deductions are accepted. Consulting with a tax professional can also help maximize allowable expenses while maintaining compliance.