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Is a dog your best friend or a tax deductible expense?

Helen Thornley untangles the tax leads for sheep dogs, guard dogs, office dogs, therapy dogs and assistance dogs.

English Bulldog sitting at a desk in front of a computer as an office manager.

An anonymous questioner on Any Answers 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 claim relief for the costs of purchasing and caring for a dog.

Paws for thought

The starting point for deductibility for tax relief is always whether the expense has been incurred wholly and exclusively for the purposes of 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 – then the expenditure has not been incurred wholly and exclusively for the business. However, some tax relief may still be available if a part or portion of the expense can be identified as relating to the trade.

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 dog, or guard dog.

HMRC accepts that guard dogs can be treated as ‘plant’ for capital allowance purposes, which gives relief for the full cost of purchase. The same principle also applies to farm dogs such as sheep dogs.

Where the working dog is an asset used in the business, the ongoing costs of feed 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.

Guard dogs

Where the dog is on guard duty, the costs of keeping a big fierce animal to defend the business premises should be tax deductible, as the purpose is clear. But claiming that your Shih Tzu is acting as a guard dog is unlikely to meet with HMRC’s approval.

Problems may arise when an owner seeks full or partial relief for an animal which is somewhere between a Shih Tzuh and the Hound of the Baskervilles, that provides guarding services as well as being a family pet. In these circumstances, there is clearly a dual purpose element, which will generally preclude relief.

While apportionment of costs is possible in some circumstances (think of a car doing business and private miles), I am struggling to see how apportionment would work for the costs of keeping a dog. Apportioning feed costs on the basis of ‘x hours of walkies’ and ‘y hours of growling at strangers’ doesn’t sit well with me. In my view, it is an all or nothing approach, with the fact the animal is also a pet resulting in all expenses being prohibited as dual purpose.

Definitely don’t let your client tell HMRC that the animals are guard dogs designed to protect the individual’s privacy, and also describe them in media interviews as family pets.

Office dog

Another claim that looks like a shaggy dog story to me is the office companion dog.

If it belongs to the boss and goes home with them every night, even if clients enjoy petting it or it gets a lot of likes on the firm’s social media, it would take quite a lot of work to convince me that the underlying purpose was not to acquire a pet. Its presence at work is just a way of saving on doggy day-care.