From guard dogs to ‘trivial’ treats: a guide to unusual business expenses

Most business owners know the basics of allowable expenses – mileage, office supplies, accountancy fees and so on. However, the UK tax system has some genuine curiosities lurking in its margins – expenses that sound absurd until you understand the logic behind them, and those that sound entirely sensible until HMRC reminds you they are not. In this post we take you on a brief – and hopefully entertaining – tour of unusual business expenses claims.

The ‘Wholly and Exclusively’ Golden Rule

Before getting to the interesting cases of unusual business expenses, it is worth understanding the rule that governs all of them. Under HMRC’s Business Income Manual BIM37000, an expense is only allowable if it is incurred “wholly and exclusively” for the purposes of  trade. The moment an expense has a “dual purpose” – serving both business and personal ends – it is generally disallowed. In most cases that means disallowed in full, though HMRC does permit apportionment in specific circumstances, such as business use of a home.

This sounds simple enough. Where it gets complicated is that HMRC does not only look at your conscious motive. It looks at your subconscious one too. Which is how a barrister once lost a tax case about black work clothes.

It is also worth noting that HMRC’s ability to scrutinise expenses is expanding. In August 2025, the Revenue confirmed it uses artificial intelligence to monitor taxpayers’ social media posts as part of criminal investigations – cross-referencing financial data, tax returns and public posts to flag inconsistencies. For now, the AI operates under legal oversight and is limited to suspected fraud cases. But HMRC has stated its intention to expand AI into ‘everyday tax processes’ – a shift that is likely to include automated data-matching across financial records and returns. The message, in short, is that claims for unusual business expenses are worth getting right.

Case study 1: the security dog’s menu

Under HMRC’s Business Income Manual BIM42100, a dog used genuinely for business security purposes can be treated as a working asset. Vet bills, food and associated care costs are thus deductible. Dogs such as sheepdogs and farm dogs can even qualify for capital allowances as “plant”.

However, there are important conditions: the dog must be a suitable breed, it must live primarily on the business premises, and – crucially – it must also not be your pet. Once a dog goes home with you at night and sleeps on the sofa, the dual-purpose problem arises and the deduction becomes harder to defend.

HMRC has made its position on this fairly clear, having included “pet food for a Shih Tzu ‘guard dog’” in a published list of rejected expense claims. The Shih Tzu, it is safe to say, was not assessed on its merits as a deterrent.

A German Shepherd that sleeps in a yard and genuinely guards commercial premises is a different matter. The distinction isn’t about sentiment – it’s about function and exclusivity of purpose.

Case study 2: the ‘theatrical’ wardrobe

In 1983, the House of Lords ruled in Mallalieu v Drummond [1983] 57 TC 330 that a barrister could not claim the cost of the plain black clothing she wore in court. Even though she wore it only for work, actively preferred colourful clothes in her personal life, and even would not have bought the items at all were it not for Bar Council requirements – the court still ruled against her. The deduction was refused.

The reasoning was straightforward. The court looked not just at why she thought she bought the clothes, but at what the clothes were objectively doing for her. One answer was that they were keeping her warm and decent. That was enough to break the ‘exclusively’ test.

This remains the law today, and it catches a surprising number of people. A suit bought for client meetings is not deductible. Neither is the outfit worn to a conference, however business-critical it felt at the time.

The exception is clothing that is genuinely not part of an everyday wardrobe: uniforms, protective gear and costumes. This is why the designer suit worn by a game show host can qualify – it’s a performance costume – while the same suit worn by an architect does not.

The practical implication for modern businesses is simple. If you create content for social media and you wear a branded character outfit, a distinctive costume or specific branded clothing that you would never wear outside that context, you have a defensible claim. The costume must be genuinely that. If they’re simply your own clothes, pressed into service for a reel, you can’t claim for them.

Case study 3: the ‘trivial’ loophole

This one is not really a loophole. It is simply an underused rule with a slightly misleading name. HMRC uses the term ‘trivial benefits’ to describe small, non-cash gifts given to employees – and the rules around them are more generous than you might think.

Under Section 323A of the Income Tax (Earnings and Pensions) Act 2003, employers can give employees – including company directors – small gifts without triggering a tax charge. The conditions are as follows:

• The benefit must cost no more than £50
• It must not be cash or a cash voucher
• It must not be provided as a reward for services performed
• It must not be contractually obligated.

There is also a £300 annual cap that applies specifically to directors of close companies – broadly, those controlled by five or fewer shareholders. For ordinary employees, there is no annual cap: the £50-per-gift limit is the only constraint. The cap for directors exists because HMRC recognised that a sole director can, in effect, decide to give gifts to themselves. This scenario  called for some constraint.

It’s important not to get tripped up by the rules regarding ‘trivial’ gifts. The most important thing to remember is that, if the gift is given because of good performance, it becomes earnings. If it is genuinely just a “thank you” or a seasonal gesture, it falls within the exemption. HMRC is not unreasonable about this distinction, but it does expect the purpose to be genuine.

Case study 4: research meals and competitor tasting

Research meals are perhaps the most relatable unusual business expenses – the wholly and exclusively rule bites hardest when the expense is also something you’d happily do anyway.

For hospitality businesses – restaurants, caterers, event companies – eating at a competitor’s venue to understand pricing, menus and service standards is a legitimate business activity. The expense can be allowable, but HMRC expects the purpose to be demonstrable. A useful test is whether you could write a brief note afterwards that summarises what you learned. For example, did you gain insights into the pricing structure, menu positioning, portion size and service standards? If the answer is yes, and you have that note, you are in defensible territory. If the answer is “it was very nice and we ordered the tasting menu,” you are not.

For food writers and reviewers, we’re not aware of any definitive HMRC ruling to fall back on, so the argument has to be built from first principles. The meal is not competitor research – it is the work itself. This is precisely where the dual-purpose problem bites hardest. The strongest position involves a clear commission, a direct link to published output and documentation made at the time. A receipt and a published review make a better case than a receipt alone.

So, if you claim a Saturday night at a Michelin-starred restaurant as a business expense for any reason at all, it is exactly the kind of claim that benefits from a contemporaneous paper trail rather than a retrospective explanation.

Got a receipt that’s a bit ‘out there’?

The wholly and exclusively rule has real teeth, but it also has real flexibility for those who understand it. A security dog is not inherently absurd. A branded costume is not inherently frivolous. Unusual business expenses are not inherently suspicious – what matters is purpose, exclusivity and documentation

If you have an unusual expense and you are not sure which side of the line it falls on, THP can help you work it out. Our Self-Assessment Tax Return service helps answer these kinds of questions – and our bookkeeping service means your records are in the kind of shape that makes any HMRC enquiry far less stressful than it might otherwise be. Get in touch today to learn more.