For expenditure to be deducted from income, it must be of a revenue nature and incurred ‘wholly and exclusively for the purposes of the profession’.
Separate allowances – ‘capital allowances’ – are given for capital expenditure. In essence, a proportion of the capital expenditure, known as the Annual Investment Allowance (AIA) or Writing Down Allowance (WDA) is allowed as a deduction from income each year as if it were a revenue expense. Again, the expenditure must be wholly and exclusively for the purposes of the profession.
As a general rule, an expense which is incurred repeatedly is regarded as revenue, whereas an expense incurred as a one off would tend to be capital. For example, lease payments for the rental of equipment would be regarded as revenue expenses, but an outright purchase of the equipment would be treated as capital.
Such things as Chambers’ rent, stationery, travel and hotels would normally be revenue expenses, while furniture, sets of law reports and computers would be capital expenditure. There are many other items which could fall into one or the other category and be claimed for.
Applying the test of ‘wholly and exclusively for the profession’ is not always simple, as sometimes you may have a dual business and non-business purpose in incurring an expense – for example, subsistence when in chambers, or dining expenses. In that case the expense is non-deductible in its entirety.
I can help you to determine which expenses and allowances you can claim.