The rule for expenses to be allowable is that “they are legitimate business expenses” i.e. a cost you’ve incurred 'wholly, necessarily and exclusively’ in order to perform the duties of your employment. HMRC tax law is very strict in the definition of business expenses that can be claimed.
Expenses Allowed through a Limited Company
During the course of your contract, you will incur expenses other than those agreed by your agency or client. These costs can be offset against your personal tax, thereby reducing your tax and National Insurance liability. In order to maximise your net return it is imperative that you claim everything allowable.
Examples of claimable expenses are as follows:
HM Revenue & Customs tax rulings on claimable expense may change subject to current legislation. Carrington can give you further advice however in the meantime, one could consider the following:
- Business mileage allowance
- Business travel
- Subsistence allowance where an overnight stay is needed is claimable as well as if the length of the journey during the day means that eating on the move is unavoidable. There is no actual limit but a receipt is required and claims need to be reasonable, £5 to £10 is usually realistic; hotel and accommodation costs if necessary for your contract
- Fares to a client’s site, where your contract remains 24 months or under
- Professional subscriptions and training and education
- Protective clothing (Does not include normal work clothing)
- Telephone calls, mobile calls, mobile phone and internet costs
- General company expenses
- Eye tests
- Premises costs
- Repairs and renewal of assets
- General administrative expenses
- Motor expenses
- Legal and professional costs
- Computer hardware and software
- Use of your home as an office;
- Printing, postage and stationery;
- Legal and accountancy fees;
- Bank charges and interest;
- Company pension – If you are paid through the company then these contributions also avoid 12.8% employers National Insurance. This will be discussed at your first meeting with your accountant, who will advise you of the most beneficial structure for your company, alternatively call us on 020 3713 4530
- Insurance including health and medical insurance;
- Professional Indemnity and Public and Employers Liability Insurance (Professional Indemnity premiums fall outside the 5% allowance);
- Travel to and from your home country, for overseas contractors in the UK;
- Business entertainment (although, these are not tax-deductible);
- Christmas or Annual Party costs of £150 per employee.
Expenses you are not able to claim:
- Lunchtime (or mid-shift) meals;
- Dry cleaning;
- Non-business software
This expenses list is not an exhaustive list. If you are unsure and would like more information, please contact us on 020 3713 4530.
NOTE: You need to keep receipts for all expenses claimed for a period of seven years.