I recently had a meeting with a client with an attractive designer laptop bag/handbag which got me thinking…..would it be an eligible business expense?
If you run your own business you might be wondering if you can claim the cost of a handbag as a tax deduction for your business. After all, you need a bag to carry your laptop, work papers and other essentials when you visit work spaces or clients. Surely, that counts as a business expense, right?
Well, the answer is not so simple. The bag must be used only for carrying items you need for work such as a laptop, work papers or diaries. If you put your lunch, wallet, keys or phone in there too – you can’t claim anything.
This means that if you want to claim a handbag as a tax deduction, you need to prove that it is exclusively used for work purposes and that there is no significant private use. This can be tricky to do, especially if you use the same bag for personal and professional occasions.
The basic rule is that an expense has to be wholly and exclusively a business expense. This means that if you use your handbag for both work and personal reasons, you cannot claim it as a tax deduction. However, if you buy a bag that is specifically designed for carrying your laptop and other work equipment, and you only use it for work, then you may be able to claim it as an annual investment allowance
So, what can you do if you want to buy a nice handbag for your business and claim it as a tax deduction? Here are some tips:
- Choose a bag that is clearly intended for work use, such as a laptop bag or a briefcase. Avoid bags that look like fashion accessories or have multiple compartments for personal items.
- Keep receipts and records of your purchase and use of the bag. You may need to provide evidence of how often and where you use the bag for work purposes.
- Use the bag only for work-related activities. Do not put any personal items in it or use it for non-work occasions.
- Consult an accountant or a tax adviser before claiming any expenses. They can help you understand the rules and regulations and avoid any penalties or audits.
Remember, claiming a handbag as a tax deduction is not impossible, but it is not easy either. You need to be careful and honest about how you use the bag and what you put in it. If in doubt, talk to your accountant or stick to a simple rucksack.