In calculating rental business profits, a customer can deduct business expenses so long as they are:
- incurred wholly and exclusively for business purposes,
and
- not of a capital nature.
Most of the trading expenses rules are applied to property income. This includes the ‘wholly and exclusively’ rule which says that expenses cannot be deducted unless they are incurred wholly and exclusively for business purposes.
All the evidence must be considered in determining whether an expense was laid out wholly and exclusively for business purposes, but generally it is quite clear-cut whether or not any given expense would fall under these rules.
Strictly, if an expense is not wholly and exclusively for the purposes of the property business, it may not be deducted. In practice, though, some dual-purpose expenses include an obvious part which is for the purposes of the business. In these cases, HMRC usually allow the deduction of a proportion of such expenses.