Business Surgery: Keith Senior, director at Jacobs Allen in Bury St Edmunds, takes a light-hearted, festive look at Santa's tax return
As we approach Christmas, spare a thought for poor old Santa! No sooner will he have finished his busiest time of the year, than he has to get started on preparing his tax return in regard to the business he operates in the UK.
Like most of us, Santa finds that preparing his tax return can be a real drag. Fortunately however, his elves have been working behind the scenes to keep the robust business records, now digital for Making Tax Digital, that Santa will need for his tax return.
So what expenses can Santa claim … provided of course that the elves have kept appropriate records?
All elves’ wages, pension costs, expenses and tools are 100 per cent tax deductible. And the costs of any training courses attended are fully tax deductible for those more ambitious elves who want to advance their careers, for example by learning how to make new toys.
As well as deductions for the day-to-day expenses of broken tools, repairing workbenches and so on, there are likely to be Capital Allowances available to Santa. There might even be the potential for Research and Development Allowance claims in relation to the scientific and technological advances developed by the boffin elves in the specialist toy workshops!
The cost of cleaning, repairing or replacing any specialist protective red cloak clothing is fully tax deductible, but it’s always possible that the Revenue will suggest that’s his normal dress, so fails the sole business purpose test. We’ll need to help on that front.
Essential expenses including the reindeers’ food, harnesses and vet bills are all fully tax deductible.
It may also be possible to claim Capital Allowances in relation to the reindeer, as 'working animals'.
Although Santa’s sleigh is powered by magic, and so there will be no fuel costs, all bodywork and mechanical repairs are fully deductible costs. And as it qualifies as a zero emissions goods vehicle that’s mechanically propelled, a new sleigh bought in the year or another before April 2025 will be eligible for 100 per cent First Year Allowances.
He should always be wary of getting behind schedule and having to hurry, as the cost of speeding fines is specifically excluded from being tax deductible, though it has to be said we’ve never seen that he’s been caught by a traffic camera.
Of course, Santa doesn’t operate for profit, and there’s a huge question mark around where his income arises and if he’s even in business at all for tax purposes. And all this doesn’t even start to address his tax residence and double tax treaties. Poor Santa seems to be one of those people who try to keep things simple but regulations just make life complicated. But that’s why we’re here to help.
Keith Senior is a director at Jacobs Allen Chartered Accountants
