UK Tax Questions Answered by Shrewsbury Accountant No. 47

With chaos still raging in the financial markets because of Trump’s Tariffs, the tax implications of Rachel Reeves’ second budget or as she prefers to call it ‘The Spring Fiscal Statement’, are still uncertain. So, as it’s been several months since I last looked through my postbag for some interesting tax related questions, here’s the latest instalment of questions asked by clients and readers of the Blog:

1. Tax implications of furnished holiday lets
2. Fluffy towels for babies, are they VAT zero-rated?
3. Can I claim for my prescription glasses?
4. Is a lost deposit allowable for tax relief?
5. Can I claim for my bedroom and its contents, as an office?
6. Are special diet foods allowable as an expense?

1.Tax implications of furnished holiday lets

I’m in the process of building a holiday flat type extension to my house that I intend to let out as a furnished holiday let, but not all year. What is the potential impact for me re Capital Gains Tax, income tax etcetera?

Answer

The rules changed on 6th April 2025, with FHL status being abolished. This change will remove the tax advantages that current FHL landlords have received over other property businesses in 4 key areas. So, for full information on the changes go to: https://www.gov.uk/government/publications/furnished-holiday-lettings-tax-regime-abolition/abolition-of-the-furnished-holiday-lettings-tax-regime

2. Fluffy towels for babies, are they VAT zero-rated?

I run a small retail shop specialising in baby products from cotton nappies to cots. I’ve recently started selling a new line of small fluffy cotton towels, embroidered and trimmed with satin. I’ve checked in VAT Notice 714 and it is not clear if they’re zero-rated or not. The only thing relevant I can see is towelling bathrobes without sleeves, which are zero-rated. Can you advise please

Answer

Baby’s clothing is zero-rated, and this includes towels with a hood or sleeves. Unfortunately, even though your satin trimmed towels are clearly aimed at very young children, without a hood or sleeves, they’re just considered to be small towels and standard rated at 20%

3. Can I claim for my prescription glasses?

I’m self-employed software engineer and stare at computer screens all day. My optician recommended special lightweight tinted glasses for when I stare at screens, which I bought and no longer suffer from eye strain and the associated headaches. Can I claim tax relief for them as they were quite expensive?

Answer

If you need glasses in general, then relief is not normally available. However, if your prescription states they are required for VDU use, you can claim tax relief on the basis that they are necessary for you to continue with your business. Additionally, you can also claim for the associated eye test.

4. Is a lost deposit allowable for tax relief?

I run a small engineering company and nine months ago, I ordered a state-of-the-art laser welder. The supplier’s terms were 80% upfront on receipt of a pro-forma invoice, with the balance payable 30 days after delivery. The machine never arrived and after multiple promises to refund my money, six months later they went into liquidation. To rub salt into the wound, my accountants have now told me that the payment can’t be allowed against corporation tax, as the equipment had never been delivered. Surely, they’re wrong.

Answer

Good news. In law, the upfront payment is considered to be a deposit and as such is allowable for bad debt relief. Your existing accountants have clearly misunderstood the transaction and given you incorrect advice.

5. Can I claim for my bedroom and its contents, as an office?

I run my own small planning consultancy and since the 2020 lockdown, I’ve undertaken most of my business from home on Zoom. I’ve tried to make the small bedroom I use as much like an office as possible. This includes matt pastel paint on the walls, industrial carpet and a painting of my professional body’s HQ (Surveyors House in Westminster) which is seen over my shoulder during zoom meetings. I consider that the changes I’ve made enhance my professional image and presentations to clients but have been told by my accountant that it is non-deductible for tax. Is she correct, as the bedroom is exclusively used as an office?

Answer

Provided that none of the items in the room are of high value, especially the painting, and it is clear that the room’s setup makes it realistically difficult for it to be used for its original purpose as a bedroom, then the answer is a qualified yes. I would also suggest that the values of the various items are combined and entered in your business records as F&F and written off at HMRC’s standard percentage of 18% pa.

6. Are special diet foods allowable as an expense?

I run a micro-company (just me and two employees) and I’m severely lactose intolerant. I often have to go on sales trips and struggle to get the correct food when working away and need to buy soya-based products, such as tofu, which can be expensive. I need these foods because of my severe intolerance, so are they allowable as a travel related subsistence expense?

Answer

Any food and non-alcohol drink costs that you incur whilst you are away from your permanent workplace are potentially tax deductible for the company. Regrettably HMRC’s scale rates are not generous and range from £5 for up to 5 hours away to a maximum of £25 per day if you’re away for 24 hours. These are flat rates and do not vary even if you have a recognised medical condition, sorry to be the bearer of bad news.