With contracting comes freedom and responsibility. It can be difficult to know every last minor detail of legislation, but understanding expenses will reap benefits.
As you probably know, correctly claiming for legitimate business expenses can reduce your tax bill, so it is well worth taking a little time to understand exactly what you can claim and what you can’t.
When it comes to Limited Company Expenses you are able to receive tax relief on these costs.
HMRC’s definition of a ‘business expense’ is a cost which is wholly and exclusively incurred for your business. Therefore, if you are a limited company operating outside of IR35 you may be able to claim on any costs you have that fit this description. Some examples of typical business expenses include:
Many contractors who are trading as a limited company, enlist the help of an accountant such as ourselves to take care of both their business and their personal tax requirements. This cost is directly related to the running of your business and is therefore claimed as a legitimate business expense.
If your business requires you to stay away from your permanent address for any amount of time, then this could be claimed as an expense, as well as a daily allowance for meals as well.
As long as the childcare provider is registered, you can arrange for your company to pay the childcare provider directly. By doing this, the company receives tax relief on payments which helps reduce the corporation tax bill. You can claim up to £55 a week.
If your business requires you to travel then you can claim the cost of this travel as an expense. Contractors can claim 45p a mile for the first 10,000 miles travelled in a financial year, and then 25p for every mile after that.
Some clothing can be claimed as a business expense if it is protective clothing or a branded uniform item. However, normal business dress that could be used as part of your everyday wardrobe cannot be claimed, even if this is something which you personally wouldn’t otherwise wear.
If you use your mobile for both personal and business use, then you can only claim the business calls and texts as an expense. You can claim one phone, even if you use it personally, but there are specifics so to be sure take advice.
You can claim branded stationery such as letterheads, business cards, pens and so on as a business expense.
If you take a training course that is exclusively for business purposes, then you can claim this as a business expense, along with professional subscriptions, any travel and subsistence costs.
As a contractor, to claim an expense, you need to pay for the expense from your personal bank account and then write a company cheque or do a bank transfer to cover the cost from your company account to your personal account.
Whenever you pay for an expense, whether from your personal account or your business account, then you need to keep a receipt for this expense for at least 6 years. This is a legal obligation and would be required to support your case should there be one.
If you have any further questions on your expenses as a contractor please contact Ascendis on 0161 359 4227 or email, email@example.com.