Can the cost of caring for an animal be tax-deductible?
If your business involves caring for an animal, it's reasonable to assume that you'll be able to claim back the costs involved. However, it's not always clear-cut and the rules on claiming expenses for animal care depend on what the animal actually does for your business.
Farm animals, such as cattle, sheep or laying hens, would be treated as either stock of the business, or, if the animals form a production herd, as a capital asset.
A production herd is one that is kept for what the animals yield while they are still alive, such as wool, eggs, milk, honey, or live young - and each production herd is made up of animals of the same species used for the same purpose. So for example, a flock of sheep kept for wool is the same herd whether it's a mixture of breeds or not, but a flock of one breed kept for wool and another breed for cheese would be two separate herds.
HMRC calls them herds whatever the actual collective noun for the animals is - for example, a hive of bees kept for its honey is still referred to as a production herd.
So farm animals are definitely tax-deductible in one of two ways, either as stock or as assets.
There may also be animals on a farm that are kept to do a job of work but which are not part of what the farm produces, such as a sheepdog or a horse used for carting or ploughing.
These working animals are treated in the business books as capital assets that qualify for capital allowances. Feeding and caring for them would be classed as tax-deductible expenses. So you could put food for these animals, veterinary fees and so forth into your business's profit and loss account as business costs and save tax.
Other working dogs, such as a gamekeeper's spaniel, police dog, or army bomb disposal dog, would be treated the same way as a farm working dog.
There is very little guidance from HMRC about how to treat different working animals for tax purposes. You could argue that, for example, a cat kept to control the number of mice in a grain store would also be a working animal and would be treated for tax like a working dog.
HMRC does say that this treatment would also apply to animals kept for show, racing or other competition purposes - such as a flock of racing pigeons.
HMRC have been known to claim that guard dogs, especially those who guard a business run from home, are actually pet animals and therefore the cost of buying and feeding the dog is either not allowable for tax or only partly allowable. However, there have been some exceptions to this.
It stands to reason that a guard dog that isn't also a pet animal should be treated just like any other working dog. In that case, you could claim capital allowances on the cost of buying the dog and maintenance costs for the dog - such as feeding and vets' bills - are tax-deductible expenses.
If you have a pet dog that also carries out some guard duties, for example, guarding a home office at night, then you may be able to claim a proportion of the dog's food, vet fees, insurance, etc. as business costs.
There is no guidance from HMRC about whether the cost of looking after a guide dog or hearing dog might ever be a business cost. In general, you almost certainly couldn't claim any costs for guide dogs, as their main function is to help you with your daily life rather than with your business operations.
If you would be unable to run your business without the help of your dog, for example you wouldn't be able to travel to visit your customers, then you may be to claim part of the cost of looking after the dog as a business cost - but you should check this with your accountant and be prepared to be challenged by HMRC.
A business that cares for animals
If your business is the care of animals, for example a boarding kennels and cattery, then the cost of feeding the animals in your care, their veterinary fees, and all the costs of looking after them, would be allowable expenses for tax.
Disclaimer: The content included in this guide is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this guide. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.