HMRC focus on Private Use Adjustments

HMRC has recently announced an increased focus on Private Use (PU) adjustments as part of its small business compliance activity. This follows a trial in 2024, which revealed widespread issues with disallowable private use being incorrectly included in business expense claims.

As a result, HMRC plans to open more enquiries into PU adjustments for business expenses claims made by sole traders, partners and landlords, where personal use of business assets or services has not been correctly apportioned.

Private Use (PU) adjustments are required when an expense is incurred for both business and personal purposes. Only the business-use portion of the expense can be claimed as an allowable deduction for tax purposes.

Expenses incurred wholly for personal use are not allowable and should be excluded from business accounts entirely.

• Motor vehicle expenses
• Farmhouse or home office costs
• Internet and telephone charges

Sole traders and partners must review such mixed-use expenses annually, especially if personal or business use has changed during the tax year.

With HMRC’s focus in mind, it is essential to:

• Review all mixed-use expenses for the current and previous tax years.
• Ensure that business-use proportions are realistic, justifiable, and backed by appropriate records (e.g. mileage logs, usage diaries).
• Update any outdated or estimated claims to reflect actual use as closely as possible – if we already prepare your accounts, we’ll discuss the apportionments with you as part of the initial accounts preparation.

While this review will not prevent HMRC enquiries, it will help ensure that robust supporting evidence is available to defend the position and swiftly rebut any challenge.

If you would like any advice on private use adjustments, please get in touch with one of the team.