26/10/2026
🍺 “John in the pub said he puts it through the business…”
We hear plenty of tax advice that starts like this. Unfortunately, paying for something from the business account does not automatically make it tax deductible.
Here are a few of our favourites…
🍹 MYTH 1: “I put all my holidays through my limited company — I save the tax.”
FACT: A private holiday does not become a business expense because the company paid for it. If it is personal expenditure, your accountant may have posted it to your Director’s Loan Account rather than claiming tax relief. If that balance is later cleared by a dividend, you could then have dividend tax personally, assuming there are sufficient distributable profits and the dividend is validly declared.
⛳ MYTH 2: “I put my golf trips with my mates through the business and claim the VAT and tax back.”
FACT: A weekend playing golf with friends is private expenditure. Even genuine business entertaining is generally specifically disallowed when calculating taxable profits under s45 ITTOIA 2005 for unincorporated businesses and s1298 CTA 2009 for companies. HMRC also generally blocks input VAT on entertainment provided to UK business contacts.
So calling your friends “clients” doesn’t suddenly make the golf weekend deductible.
🚘 MYTH 3: “My business bought my car, so I claimed all the VAT back.”
FACT: VAT on the purchase of a car is normally blocked. For most businesses, full VAT recovery requires the car to be used exclusively for business purposes and not made available for private use. There are separate exceptions for certain activities such as taxi hire, self-drive hire and driving instruction.
Driving it home and using it personally is therefore very different from a genuine business-only vehicle.
💷 MYTH 4: “I’m a sole trader, so the money I take out each month is my wage and reduces my tax.”
FACT: You cannot employ yourself as a sole trader. Money you take from the business is drawings, not a deductible wage. Your Income Tax is calculated on your taxable business profit, not on how much cash you withdraw. HMRC specifically identifies proprietor “wages” as drawings rather than an allowable business expense.
🚗 MYTH 5: “I put all the HP payments on my personal car through as a motor expense.”
FACT: Not quite. If you own the car under HP, the capital element isn’t simply deducted as a motor expense; the appropriate tax relief may instead come through capital allowances, subject to the car rules and your business/private use. The finance/interest element can be deductible, but for a mixed-use car it needs to be restricted to the business-use proportion.
And ordinary home-to-work commuting is generally private travel, so don’t assume those miles form part of your business percentage.
⌚ MYTH 6: “My company bought me a Rolex — so it’s tax deductible.”
FACT: A company paying for a Rolex for a director doesn’t magically turn a luxury watch into a tax-free business expense. The purpose and actual use matter. Expenditure must satisfy the wholly and exclusively test for a trading deduction, and an asset made available to a director for private use can also create a taxable benefit.
If a company genuinely acquires an asset solely as an investment and it isn’t available for the director’s private use, that’s a different set of facts — but wearing your “company investment” on your wrist is where that argument starts becoming difficult.
🍺 Moral of the story?
John in the pub might be very good company. He isn’t necessarily very good tax advice.
Before you “put it through the business”, speak to your accountant and find out what you’re actually entitled to claim.
JCM Accountancy Limited
📞 0191 464 7173
📧 [email protected]
