The general rule for all expenses to be tax deductible is that it has to be wholly and exclusively for the purpose of the trade – if there is duality of purpose (i.e. can be used privately as well), then it is not allowable for tax. There are however specific exceptions to this rule. One of them being mobile phones. Directors/employees may have one company mobile phone, which is fully paid for by the company. If the Smart Watch has its own cellular connection, so you can make and receive calls and messages out of the office, then it could be allowable as a normal mobile phone, providing the watch is your only work ‘mobile’. If you have a work mobile phone as well, then the watch would count as a second ‘mobile phone’, on which you would have to pay BIK tax. It would be more tax efficient to just allocate it to your director’s loan account, and avoid the BIK tax. If the Smart Watch only has connectivity when in the range of an actual mobile phone (i.e. a model without a cellular connection), then HMRC will argue that there’s only one purpose for the watch, i.e. a personal one. As it’s not enabling you to keep in touch, you can only do so when you have your (connected) work mobile with you which already fulfils those purposes adequately. Therefore not only it is not a deductible expense for the purpose of the trade, there is also a ‘use of company asset’, on which you would have to pay BIK tax. It would be more tax efficient to just allocate it to your director’s loan account, and avoid the BIK tax.