Poor old Santa! No sooner than he has finished his busiest time of the year, than he has to get started on preparing his tax return.

Like most of us, Santa finds that preparing his tax return can be a real drag. Fortunately however, Santa’s elves have been speaking with us here at Independent Tax, and they have been working behind the scenes to keep the robust business records that Santa will need for his tax return.

And, just as importantly, to make sure that if the Tax inspector, Mr Grinch, decides that he wants to visit Lapland to review Santa’s tax return (COVID permitting, of course) he goes back not only with cold feet, but with empty pockets.

So what expenses can Santa claim…provided of course that the elves have kept appropriate records?

The elves themselves

All wages, pension costs, expenses and tools are 100% tax deductible.

And for those more ambitious elves who want to advance their careers, for example by learning how to make new toys, the costs of any training courses attended are fully tax deductible.

Workshop

As well as deductions for the day-to-day expenses of broken tools, repairing workbenches and so on, there are likely to be a range of other allowances available to Santa, for example Annual Investment Allowances, Capital Allowances, First Year Allowances, and so on.

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!

Red cloak and boots

The cost of cleaning, repairing or replacing any specialist protective clothing is fully tax deductible.

Mrs Claus

Although Mrs Claus is kept busy feeding Santa’s reindeer, she does this from love rather than for reward.

Provided that she hasn’t received income from elsewhere, she may be able to transfer some of her unused Personal Allowance to Santa to help reduce his tax bill.

Reindeer

Essential expenses including their 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”.

Sleigh

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 a zero emissions good vehicle, Santa may be able to claim 100% First Year Allowances on the cost of the sleigh itself.

Though he needs to watch out for speeding fines if he gets behind schedule and has to hurry, as the cost of such fines is specifically excluded from being tax deductible.

Other considerations

As Santa does not operate for profit, there’s a huge question mark around whether he’s even in business at all for tax purposes.

And, of course, his tax residency position could be a nightmare…

Merry Christmas from all at Independent Tax!