Can I pay for Spotify and Amazon Prime through my Business?

lady with feet on desk listening to music with headphones

We often see clients that put Spotify and Amazon Prime subscriptions through their business as an expense, because they use them in their everyday business life, but are they an allowable business expense?

In the world of business and taxation, it’s no secret that managing expenses is crucial in maintaining profitability. Business owners often rely on tax deductions to ease the financial burden of running their operations. However, not all expenses can be claimed as tax deductions, especially those that are not “wholly and exclusively” for the purposes of the trade, profession, or vocation. HMRC (Her Majesty’s Revenue and Customs) – can we say this as we now have a King? has stringent guidelines concerning these expenses, and failing to adhere to them can lead to disallowance for tax purposes.

Why are Spotify and Amazon Prime not an allowable business expense?

There are a lot of instances where you could argue that as a business you need Spotify at work to create an ambiance in the office or to entertain clients, but you could also use it on personal devices. You could be using Amazon Prime to get next day deliveries of stationery, but you could also be using it to binge-watch your favourite series. Therefore, Spotify and Amazon Prime can be used for business and pleasure and have a dual purpose, and do not meet the “exclusively for business” criteria.

This will also apply to computers or office space, that are used for both personal and business purposes. HMRC may only allow a partial deduction based on the proportion of business use.  Non-compliance can lead to disallowed deductions and potential penalties. It may be that as a business owner, you have always put these expenses through your business and you still can but when your Accountant prepares your accounts, these expenses will be disallowed.

What is HMRC’s wholly and exclusively rule?

HMRC’s “wholly and exclusively” rule for business purposes, means that in order to be eligible for a tax deduction, an expense must be incurred solely for the purpose of conducting business. Any personal use or dual-purpose expenses do not qualify. HMRC carefully examines the nature of expenses claimed by businesses. Costs that have a dual purpose, serving both personal and business interests, are typically disallowed. You can find out more here.

These are the types of questions we also get asked in our weekly Sage Lady Academy Q&A sessions. Our membership provides affordable training, support and mentoring from Bec (aka “The Sage Lady”) on all matters relating to Sage 50 Accounts, bookkeeping and accounting principles via training, masterclasses and our weekly Live Q&A, where you can submit questions for Bec to answer and show you how it’s done, plus much more!

Find out more about The Sage Lady Academy…

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03.10.2023

“Any advice relating to accounts or tax should be sought from your tax accountant. Sage Accounts Solutions Limited will not be held responsible for any loss or damage caused as a result of the information contained herein.”

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