Tantric workshops, live lobsters and lap dances: Britain’s strangest small business expenses

Business finance experts are reminding business owners that reasonable costs directly linked to running a business are classed as legitimate expenses, no matter how unusual they may be after uncovering hundreds of strange but valid expenses.

Research revealed that 44% of SME owners fail to claim business expenses due to fears of penalty fines, and being unsure what qualifies as a legitimate expense. As part of the study into the financial health of SMEs, some of Britain’s most bizarre expenses were uncovered, including live lobsters, pink tutus and lap dances.

The research by The Accountancy Partnership found that 65% of UK small business owners let expenses go unclaimed each year, meaning almost 4 million businesses are missing out on tax relief and potentially hampering profitability.

HMRC allows business owners to deduct costs incurred in the running of the business from its taxable profits, reducing their overall tax bill. Allowable expenses are any reasonable costs that arise as a direct result of the business.

Lee Murphy, managing director at The Accountancy Partnership, said: “HMRC’s guidance around what qualifies as a legitimate business expense can be vague and confusing and fines for getting it wrong can be high, so it is unsurprising that so many SME owners avoid claiming altogether. However, expenses that occur due to business circumstances are allowable in most instances, no matter how dubious they may seem.”

This sentiment is reflected in small business owners’ responses when asked what their most unusual legitimate expense has been.

Client entertaining has led to entrepreneurs expensing lap dances and a trip to Victoria Falls National Park in Zimbabwe. Others have expensed two live lobsters, a tantric workshop session, an adult-size pink tutu, and the costs of a cremation.

A mass purchase of sex toys from China may have led to some giggles at HMRC, but as an expense for an e-commerce business, it is legitimate and allowable.

Lee continued: “Our research suggests that around £5.6billion in expenses goes unclaimed by small business owners every year due to hesitancy, which seems to be endemic. Allowing seemingly small costs to aggregate means many businesses are missing out on substantial amounts of tax relief, which may impact profitability and overall business health.

“Of course, fines can also seriously harm small businesses, so it is crucial to keep meticulous records of expenditure and financial documentation to support any expenses submitted in case they are queried by HMRC.

“Finance and accounting professionals are experienced and knowledgeable when it comes to claiming expenses, so your bookkeeper or accountant should always be your first point of call if in doubt over whether or not something qualifies as an allowable expense.”