Personal Security is Tax-Deductible

Personal Security is Tax-Deductible

Did you know Personal Security is Tax-Deductible?

Many large corporations, companies, and individuals consider personal security an unwanted, unwarranted, and non-profitable expense. They usually opt for the cheapest and most minimal tick-box requirement. But investing in security may increase productivity and profits long-term. Good personal security is always less expensive than losing business assets through theft. Personal security preventing employee/owner long-term absence or death in a robbery or targeted attack is always a wise investment.

But did you know that personal security is an allowable business expense? Allowable business expenses are tax-deductible. So you can reduce your tax liability while increasing your security and peace of mind. This little-known fact is not published or discussed in any great detail online. HMRC is giving the green light to companies to spend their capital on personal security services and assets that improve personal security. The proviso is that the expenditure should be on security to meet the threats faced by employees. We will discuss qualifying ‘services and assets’ later.

It is compelling to consider the value of tax savings for those planning protective measures. Companies that value their employees’ health and safety can also benefit from improved morale, retention and reputation. More companies spending on private security would endorse the sector, triggering a snowball effect encouraging further uptake of personal security services.

We can speculate that if more companies took advantage of the tax incentives for private security, this struggling sector could attract much-needed investment. Increased personal security could free Police service resources to address the growing domestic crime rate. Despite a reduced tax intake, the net effect on public expenditure could be positive.

Conditions to be eligible for tax-deduction

Requirements listed in the HMRC Business Income Manual – BIM47310­­ state that:

The deduction for personal security expenses applies to expenditure incurred in connection with the use or provision of an asset or service which improves personal security.

Like much of the interminable UK Tax Code, this statement is open to interpretation. The code introduced grey areas by attempting to cover all possible situations in the cause of fairness. So, any individual employee or Limited company wishing to claim the deductions should document their reasoning for the allowance in case of a subsequent dispute.

Physical danger

The code goes on to focus on personal physical security. The priority is to allow costs that reduce risk to individuals’ health and safety through bodily harm. Although there is a focus on protection from acts of violence, there is no necessity for any direct or impending danger. Generally, the law does not specify the source or types of threat or specific crimes the expenditure must mitigate.

Increased risk

Expenditure to mitigate threats that every citizen may experience to a greater or lesser degree is unlikely to qualify as allowable deductions. However, the code does stipulate that certain security expenditure is only permissible in the case of a “special threat”. A special threat is an increased risk that arises mostly or entirely from the particular employment or trade. To be clear, this is a risk that does not constitute a general criminal threat.

The interpretation of “special threat” is not necessarily prescriptive and introduces a grey area open to interpretation. Depending on individual circumstances, it is arguable that a wide range of personal security assets and services should be an allowable, tax-deductible business expense.

CEOs, Directors and other Business executives of a Public Limited Company (PLC) are in an elevated position of power and answerable to their shareholders. It is our understanding and belief that they could invest in a wide range of personal security services and assets, including:

  • executive protection (close protection/bodyguards);
  • security chauffeurs*;
  • residential security guards;
  • fences;
  • walls;
  • gates;
  • CCTV;
  • lights;
  • alarms;
  • locks;
  • security windows;
  • and security doors.

Even a secure panic room could be justifiable.

*armoured vehicles are not allowable, which is odd if the threat exists, but vehicles are a non-qualifying asset.

Similarly, a company could invest in office or retail store security, including:

  • CCTV;
  • security guards;
  • security doors;
  • security shutters;
  • and security windows.

A Sole Trader or Limited Company Director working from a home-based office could also have valuable stock or data stored in their house, garage, or outhouse. They may become the victim of a targeted burglary or attack in which they would be hurt or injured. Under these circumstances, they could invest in tax-deductible CCTV, security lights, alarms, locks, doors, and windows to help protect themselves from the threat posed or perceived.

Private investigation and surveillance services may also qualify as an allowable expense if the claimant can justify that they used the services to improve their personal security.

Particular trade

Although robbery may be a generally occurring threat to any citizen in an average situation, a business robbery could be an extraordinary event. Therefore, a person may not have been endangered other than for reasons of their job role or trade.

For expenditure to be allowable, it must be seeking to mitigate a threat either entirely or predominantly due to the specific employment or trade. The type of business and work the company conducts can be considered, as can the activities members perform as part of their employed position. 

Consider a company linked to a controversial business activity or deal, as in mineral extraction groups or medical and defence technologies. Whether a project is inherently dangerous or trivial, a risk arises from external discontent. So, this could be a potential trade-related threat directed at the whole corporation or towards a specific person or group of people, such as the board members.

Some businesses are in sectors where operations are innately risky. Banking and private security itself come to mind. In these sectors, trade-related dangers are a naturally occurring issue inseparable from the work and objectives of the employees or company as a whole.

Whether or not an expenditure is deductible can depend on an employee’s position in an organisation. A company can argue that personal security expenditure on behalf of Directors, board members, and other business executives should be allowable. Sufficient internal or external risk factors may be linked to job descriptions, influence, net-worth or shareholdings. Depending on the risk, a full-time personal bodyguard may be justifiable. Alternatively, it could be that a bodyguard is justifiable only at specific business meetings such as annual general meetings or international business trips. It may be that a security chauffeur can be justified to escort them to and from work. Other services and assets linked to specific people could include security guards stationed within the office environment and installing security assets such as security windows – anti-bandit, or even ballistic/bulletproof glass, reinforced security doors, and CCTV systems.

Allowable expenses may even extend to private homes and grounds if the threat and risk are deemed high enough by the employing company or individual business owner. The fact that an asset or service improves the personal security of a family member of the employee’s household and that of the employee/owner does not prevent a deduction from being allowed.

What are security services and assets?

‘Security services and assets’ is a broad term. For clarity, some potentially qualifying personal security services and assets include:

ServicesAssets
Close ProtectionCCTV, Alarms, Lights
Security ChauffeurFences, Walls, Gates, Locks
Residential Security GuardsSecurity Windows, Doors, Shutters
Office Security GuardsAnti-Theft Fog Machines
Retail Security GuardsStab Vest, Ballistic Vests
Surveillance Operatives(Attack/Rape) Alarms, Body Cameras

All the costs incurred on the material asset qualify, including any structure or equipment used chiefly for the specified security purpose such as:

  • Access control (fences, walls, gates, security windows, or doors, etc.)
  • Equipment (alarms, lighting, CCTV, metal detectors, etc.)

The right to deduction is not affected by the property and the interest or estate when considering a fixture to a building or the associated grounds. It is not affected by the employee becoming entitled to the property concerning the asset.

Non-qualifying assets are:

  • vehicles (cars, ships, or aircraft);
  • buildings (living accommodation, any legal dwelling) constituting the full structure of a residence;
  • grounds appurtenant to a dwelling.

This article is for informational purposes only. It does not constitute personal tax advice. Westminster Security is not qualified to provide legal, financial, or tax advice. Please seek professional tax guidance and assistance from your appointed tax advisors.

However, we are professional security consultants and an industry-leading private security company specialising in personal security.

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Westminster Security provides professional personal security services in London, the UK, and worldwide.