renting close to gig

[meridian]

Your analogy is not correct in this instance I believe... The cars and the hotels yes because you have a need for a car, the type doesn't matter, and a need for the hotel, the name doesnt matter. In this case he does NOT need to rent the house so you are comparing apples and pears.

HMRC cannot (yet!) dictate to a business how it spends its own money in the pursuit of income. An expense is claimable if it is incurred in relation to assessable income, and there is no distinction for "need", nor of cost, provided the business can show that the expense relates to that income.

In this instance the OP will have great difficulty in proving that the expense is incurred in relation to income rather than for private purposes. However, nobody is required to prove to HMRC that they "need" an expense before it is claimable.

[pmeswani]

HMRC cannot (yet!) dictate to a business how it spends its own money in the pursuit of income. An expense is claimable if it is incurred in relation to assessable income, and there is no distinction for "need", nor of cost, provided the business can show that the expense relates to that income.

In this instance the OP will have great difficulty in proving that the expense is incurred in relation to income rather than for private purposes. However, nobody is required to prove to HMRC that they "need" an expense before it is claimable.

So when it becomes claimable, it needs to be proved? (Just being pedantic here).

The one thing I am confused about is how does one prove that an expense is wholey for the purpose of business? How does one prove that something wasn't used for both personal and business purposes?

Don't get me wrong here, I am not looking to break the rules, but am looking for clarification on how one can prove that an expense is purely and wholey for the purpose of business (where the expense was primarily intended for the carrying out of the business).

For example, if I buy a computer (which turns out to be the only computer in the trading address, which is primarily used to carry out business activities), what is stopping, lets say, the rest of the family from using it to surf the internet? (This is assuming that the cost of the computer is expensed through the company).

I guess the question I am trying to ask here is how is it possible to avoid the potential side effects of an business expense?

[meridian]

So when it becomes claimable, it needs to be proved? (Just being pedantic here).

Of course. That's what business records are, proof of your income and expenditure to verify your taxable income.

The one thing I am confused about is how does one prove that an expense is wholey for the purpose of business? How does one prove that something wasn't used for both personal and business purposes?

Don't get me wrong here, I am not looking to break the rules, but am looking for clarification on how one can prove that an expense is purely and wholey for the purpose of business (where the expense was primarily intended for the carrying out of the business).

For example, if I buy a computer (which turns out to be the only computer in the trading address, which is primarily used to carry out business activities), what is stopping, lets say, the rest of the family from using it to surf the internet? (This is assuming that the cost of the computer is expensed through the company).

I guess the question I am trying to ask here is how is it possible to avoid the potential side effects of an business expense?

Tax is self-assessing. That means that as the director of your company, if you purchase something for business use but allow it to be used for personal use, it's up to you to justify or estimate the split. If there's a reasonable risk the you have personal use and haven't declared it or disproven it then HMRC will ask you to prove the 100% business expense.

To use your example, if you have one computer in the house and claim it's 100% business but you also have two teenage children, then the balance of probability is that it is also used for personal use. A quick check of the history logs will no doubt prove that there is at least some personal use. The usual HMRC tactic is to then disallow the lot until you can prove the business use proportion. The onus is on you (as the self-assessor and business owner) to keep logs or such before they are needed in an audit. If, however, the computer is at a business premise and the personal use is minimal (the odd posting on CUK for example), then de minimus will usually apply. (Note that I'm not saying that the full expense couldn't be justified in some way by blagging, I'm just stating what the requirement is).

How do you protect yourself from potential queries? Again, in your example, if you've taken reasonable measures to protect your asset from non-busienss use (user ID and password that the family doesn't have access to, family have their own computers also so no need to use yours, stored in a lockable office, etc - probably overkill ) than there should be no further query.