LIMITED COMPANY EXPENSES – WHAT CAN YOU CLAIM?
Jul 17, 2019
One of the main advantages of being a limited company contractor is that you can claim tax relief on business expenses. This reduces your profit which means you pay less Corporation Tax. However, it’s important to know what constitutes an allowable business expense so that you run your limited company in a tax efficient way while complying with HMRC’s rules.
Expenses you claim through your limited company must be ‘wholly and exclusively’ for the business. On the face of it, this guidance should be simple to follow. However, there are some less clear situations – for example, it may be that you work from home and use broadband and your landline phone for both business and personal use. Here we explain how to manage your limited company expenses.
What expenses can you claim through your limited company?
Accountancy feesAll accountancy fees associated with your limited company can be classed as a business expense. Accommodation costsYou can claim tax relief on the cost of accommodation when you travel to a temporary business-related location, though don’t get carried away as this cost must be considered to be reasonable. EntertainmentYou cannot claim tax relief on business entertainment or gifts though you can claim for a Christmas party. Employees may invite a partner but the expenditure must not exceed £150 inc VAT per person. EquipmentYou can claim tax relief on the cost of equipment you need to perform your work including computers, phones and furniture such as desks and chairs. As long as personal need is ‘insignificant’ HMRC will not treat it as benefit in kind which has different tax implications. StationeryYou can claim for all stationery costs including postage, printer ink, paper and pens. TrainingTraining courses which are applicable to your work are an allowable business expense. Food & drinkYou can also claim for food and drink. Lunch can be claimed if you’re out for 5 hours or more and dinner if you’re out for 10 hours or more. Eyesight testsYou can claim for eyesight tests as long as you can prove it’s necessary for the use of work-related visual display equipment. |
Medical insuranceThe cost of medical insurance cannot be claimed as a business expense – it would be considered as a ‘benefit in kind’ and subject to different tax rules. Your company claim tax relief on medical insurance for an employee working abroad and for an annual check-up. Salaries & National InsuranceSalaries paid to employees or Directors are allowable expenses, as are National Insurance Contributions. Home officeYou can claim £4 a week for using your home office if you can prove that you regularly spend time working at home. Telephones & broadbandAs long as your mobile phone and landline phone contracts are between your company and the service provider, you can claim tax relief if your company pays your entire personal phone bill then it becomes subject to the ‘benefit in kind’ rules. You can claim for business calls made from your personal phone but will need evidence such as a bill. The cost of home broadband is allowable if you work from home and your broadband contract is between your company and the service provider. SubscriptionsYou can claim tax relief on membership of HMRC-approved professional bodies relevant to your work. Travel expensesTravel expenses are allowed but you must be able to demonstrate that the journey is necessary for your work and that it is not normal commuting between your home and a permanent workplace. Travel expenses can include vehicle insurance, fuel, parking, tolls, fares for trains, buses, planes and taxis. |
Business mileage
When using a personal vehicle to get to a temporary workplace you can claim mileage (see table below). Remember to record your mileage on your company accounts as this will help to reduce your overall Corporation Tax. If you drive a company car, you can only claim the cost of fuel.
| Vehicle | Rate per mile (first 10,000 miles in tax year) |
Rate per mile (each mile over 10,000 miles) |
| Cars & vans | 45p | 25p |
| Motorbikes | 24p | 24p |
| Bicycle | 20p | 20p |
Record-keeping
When managing your business expenses it’s important that you keep accurate records and copies of receipts. File and retain copies with all your finance-related documentation so that you can easily access them for at least six years as HMRC could decide to investigate within this time.
Got a question?
Our team of expert contractor accountants is here to help ensure you claim your limited company expenses correctly. If you have any questions, please get in touch, we’ll be pleased to help.