HMRC is tightening checks on expenses split between business and private use after a 2024 pilot found widespread inaccuracies. The review, involving 600,000 taxpayers, uncovered many incorrect claims, generating £27 million in extra tax. From 2025, compliance enquiries into private use deductions will increase.

It’s also a subject we discuss with clients a lot, so in this post we’ll look at the cause of the problem, and what you can do to minimise the risks of unwanted extra attention from HMRC. 

‘Wholly and Exclusively’: The UK Tax Principle Explained

Expenses are only allowable for business tax purposes if they are ‘wholly and exclusively’ incurred for the trade. Where a cost is shared between business and private use (such as motor, phone, or home office expenses) only the business portion can be claimed. 

If use is mixed, a fair and sensible apportionment must be made for the specific circumstances of the tax year; the private element is always disallowed. 

Examples of Private Use Adjustments

• Vehicles: Apportion petrol, insurance, and repairs based on actual business and private mileage. 
• Telephone and Broadband: Only claim the business use percentage. Itemised bills support accurate split. 
• Home Office Costs: Expenses should reflect the time and space used for business activities versus private. 
• Subscriptions / Memberships: Where mixed, personal elements must be excluded from business claims. 

Practical steps to take

1. Keep detailed records

If HMRC ask questions, you need to be able to prove your figures.

• Maintain mileage logs, phone usage breakdowns, and workspace diaries demonstrating private versus business use. 
• Retain original bills, receipts, or backup calculations for all claimed expenses. 

2. Make sensible apportionments

• Apportion based on measurable criteria (e.g., percentage of hours, proportion of use).
• Document your apportionment reasoning annually per tax year in case HMRC requests evidence. 

3. Prepare for HMRC Enquiries

More enquiries are bound to happen, so be prepared to defend your position should one arise.

• Ensure you are ready to explain and evidence any split in business and private use for every expense.
• Consider reviewing previous years’ claims and, if mistakes are found, use HMRC’s online disclosure service to rectify errors before an enquiry arises. There may be penalties and interest for anything HMRC defines as a deliberate inaccuracy. 

What you should do now…

HMRC’s campaign signals a shift towards increased enforcement of accurate expense claims. Review your process for record-keeping and apportionment now and make any adjustments that you feel are necessary for you to be confident in those records. 

If you’re unsure, get in touch and we can chat things through with you to make sure you’re keeping the records you need, but not wasting time and effort through over-recording.

And remember – if you’re a client of ours and HMRC contact you, send them to us. You have membership of our fee protection scheme as part of our normal service, so we’ll deal with them on your behalf.