Running a business comes with its costs and sometimes it isn’t always clear which of these costs are tax deductible. To help, we have created a short and informative guide about commonly claimed expenses.
Understanding how reclaiming expenses works for a Limited Company
The hardest part is keeping track of your expenses, whether these have paid for personally by a director or employee, or through the business directly. Using accounting software such as FreeAgent means you’ll be able enter or scan all receipts and keep an eye on your expenses as FreeAgent will show you exactly what has been claimed at any time.
If expenses are paid for personally on behalf of a company, an expense claim will need to be made to ensure that Director or employee is reimbursed by the company for that cost.
You should always remember to keep all of your receipts to prove that your expenses are legitimate. If you don’t want to keep paper copies of your receipts then you can keep digital copies, but make sure you’ve got a backup copy!
What expenses can be claimed for?
These are just some of most common business expenses:
This could be a number of costs such as public transport, subsistence, parking expenses, flights and hotels whilst on a business trip and even temporary accommodation, if an employee or director needs to work away. If an employee or director is using their own vehicle then they can claim for business mileage at 45p for the first 10,000 business miles and 25p thereafter each tax year. The mileage allowance includes the cost of running the vehicle (such as repairs, maintenance, insurance and fuel) – so these should not be claimed on top of the mileage allowance.
An employee or Director will not be able to claim the cost of any travel to and from their home to their normal workplace. Any claims have to have been incurred for travel to a temporary workplace (you need to consider the 40% and 24 month rule, which you can find more in depth information on in the ‘travel and subsistence through Limited Companies’ guide).
A director or employee may work from home for some or all of their working time – if this is the case then a claim can be made for using their home as an office. How much that can be claimed depends on how much they work from home. There is an HMRC allowance of £6 per week, however if working from home for long periods of time then a larger claim could be made if justified.
Telephone and internet costs can be claimed by a business if the contract is in the name of that business. Employees and directors could claim for their individual costs on personal contracts but they will need look at the itemised bill and claim the cost of any specific business calls.
This will vary depending on the type of business, and the risks involved. Most Limited Companies will require:
- Professional Indemnity Insurance – this will protect the company in the event that it provides incorrect advice that causes a client financial loss.
- Public Liability Insurance – this will protect the company if someone is injured or their property is damaged because of your business.
- Employer’s Liability Insurance –This will cover any employees or temporary staff if they should want to make a claim against your business if they’re injured or fall ill whilst at work.
Any contributions made for directors and employees, will be an allowable business expense. There is a cap on the amount of personal pension contributions an individual can have each tax year and this should be discussed with a Financial Advisor to make sure you stay within the limits.
- Stationery, marketing materials and advertising
Stationery costs could be for business documents, such as letterheads, business cards, pens, paper, etc.
Plus, any costs for promoting your business and advertising your business such as adverts in newspapers, website costs and direct mail are deductible. However remember any costs for entertaining current or prospective clients is not allowable for tax deduction.
A company can only claim for the cost of any training courses which relate to its current trade, in regards to refreshing any skills already possessed.
- Professional fees, including accounting and solicitor fees
Your company is likely going to pay an accountant to help with the company’s accounts and tax affairs. This can be offset against its income and therefore will reduce the corporation tax paid.
A company may also claim other professional fees, such as solicitor’s if it needs any legal advice.
This could be any equipment that is required by a business, such as computers, printers, scanners, software, machinery and many other items.
If there is significant personal use of any company equipment by an employee or director, this will need to be considered and declared on the ‘expenses and benefits’ (P11D) submission to HMRC. This could incur additional tax costs.
- Salary and other staff costs
This includes any costs in hiring an employee in your company. A business will need to make sure it has registered a PAYE scheme and is deducting the correct taxes, along with making the relevant submissions to HMRC.
- Staff and client entertaining
A company can claim for an annual event, for up to £150 per attendee (this can include directors and employees, their partner and household members), per year.
It can be for multiple annual events, as long as the total average receipted cost comes to less than £150 per attendee. Please remember this is not an allowance, a company will actually need to have an event and claim the receipted amount.
Any other entertaining, such as drinks with a current client or dining with a prospective client, can be claimed back as an expense but a company will not get any company tax relief.
There are lots of other expenses not detailed here such as books, childcare costs, donations, eye tests, other insurances and subscriptions. This is not an exhaustive list and there will be other expenses that can be claimed, which specifically relate to a business.
How Aardvark Accounting can help you?
Alongside the personal service and advice on what can and can’t be claimed, you’ll have access to market leading software – FreeAgent. You’ll have everything you need, even on the move with the handy mobile App.
To see how we can help you and your business, contact Aardvark Accounting today. We’ll do the “aard” work for you!
01425 471917 or contact us here