An anonymous poster on an ‘Any Answers’ page on a tax forum I subscribe to, asked whether it was permissible for a self-employed individual to claim tax relief on the costs of a therapy dog.
This got me thinking about the circumstances in which the self-employed could legitimately claim tax relief for the costs of purchasing and caring for a dog.
Canine Tax Relief: Paws for thought
The starting point for deductibility for tax relief is always whether the expense has been incurred wholly and exclusively for the business. This is ultimately a question of fact, and the purpose of incurring the expenditure is critical.
If there is some other, non-trade, motive – a dual purpose if you like- then the expenditure has not been incurred wholly and exclusively for the business. However, some tax relief may still be available if some portion of the expense can be identified as relating to the trade/business.
Canine Tax Relief: Working dogs
The most obvious situation where the purchase and ongoing care costs of a dog are allowable is the traditional working dog such as a farm or sheepdog. HMRC accepts that sheep or farm dogs can be treated as ‘plant’ for capital allowance purposes, which also gives relief for the full cost of purchase. The same principle applies to guard dogs.
Where the working dog is an asset used in the business, the ongoing costs of feeding, providing shelter and vets bills are allowable and any VAT costs can be recovered if the business is VAT registered. While some farm dogs are treated as one of the family and are permitted in the farmhouse, it’s usually clear that such treatment is incidental to the active role the dog performs on the farm.
If the purpose of acquiring the dog was to perform a valuable role in the business, it follows that all associated doggy-costs should be allowable as deductions. Incidentally, where farm employees are required to keep a dog or dogs to perform their duties, they are entitled to a weekly dog allowance of £7.63 per dog per week which is not subject to tax.
Canine Tax Relief: Guard dogs
When the dog is on guard duty, the costs of keeping a big fierce animal to defend the business premises is tax-deductible; especially when the dog lives on the commercial premises. But claiming that your Shih Tzu, that sleeps on your bed, is acting as a guard dog is unlikely to meet with HMRC’s approval.
The real problem arises when a dog provides guarding services during the day when the premises are open but is a family pet at night. In these circumstances, there is a dual-purpose element, which will generally preclude relief.
While apportionment of costs is possible, how do you accurately apportionment feed costs or vets’ bills? I can only think of one, namely how many hours are spent guarding as opposed to just being a pet.
Canine Tax Relief: Therapy dogs
There will be cases where a dog has genuinely been acquired to benefit the business. Many types of animal – not just dogs – are taken into care homes, hospitals and schools where they are hugely valued and appreciated by those who interact with them.
So where the dog handler is self-employed, the argument for tax-deductible dog costs can be supported by the level of care and preparation required for such visits. Dogs must be assessed for suitability and, for those going into medical settings, higher standards of grooming are needed, a range of vaccines are mandatory and diets involving raw meat are prohibited.
indications that the dog has been acquired to enhance the therapy sessions include:
- It’s a specific breed that has been chosen to be most suitable for the role it has
- The dog has had some form of training
- The availability of the dog is advertised to clients
- It takes part in the sessions
- Some of the patients request the animal
The fact that the dog is taken home outside of working hours is incidental to its purpose as a therapy tool, so its full costs are tax-deductible.
Canine Tax Relief: Assistance dogs
Where a guide dog helps an employee to fulfil their duties, specific provision is made for tax relief for the costs of keeping and replacing the dog, and whilst hearing and other assistance dogs are not mentioned in the HMRC manuals, similar tax relief applies if such a highly trained animal enables the employee to perform their duties.
There is no specific indication that the costs of any assistance dog would qualify for tax relief for the self-employed, as there is likely to be a significant dual purpose. However, it would seem strange for HMRC to be accommodating for the needs of, say, blind employees, who are not required to apportion the cost of the dog between business or private use, but then deny tax relief for a blind self-employed individual in similar circumstances.
Tax Accountant’s view
This a personal topic for me as last year I fought a long battle with HMRC over a case where a hairdressing client with severe clinical agoraphobia could not leave the house without her cockapoo dog. She even had a letter from her NHS consultant, clearly indicating that the dog was a therapy dog and that she couldn’t do her work without it.
I’m pleased to say that I won that particular battle and that HMRC allowed all of the expenses of keeping the animal, but I would be very interested to hear of anyone else’s experience in this area.
If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.