Last month we looked at allowable expenses for self-employed
workers. We pointed out that limited company rules on expenses are different
and that we would look at those separately, which is precisely what we are
doing in this post.
What are allowable expenses for a limited company?
The key rule to follow concerning limited company expenses
is that they must be genuine. In other words, the expense must be something
that was incurred exclusively, wholly and necessarily during the course of
running your business.
Expenses that cross over both business and personal use
cannot be claimed. It is important to retain all receipts and invoices so that
if it becomes necessary, you can prove that your expenses claims were genuine.
What are typical limited company expenses that can be claimed for?
The following are some of the allowable expenses which can be
set off against Corporation Tax:
Salaries – all PAYE
salaries including directors and staff.
Subcontractor fees
– if you engage subcontractors or freelancers to undertake work for your
business then these will be classed as allowable expenses.
Pension contributions
– all pension contributions paid to staff, providing they are made via an
approved scheme.
Employer’s National
Insurance Contributions – any contributions payable on employee salaries
can be claimed for.
Travel and parking
costs – travel expenses is another topic that needs its own dedicated post
which we will cover in the future but suffice to say in general that most
travelling costs will be classed as allowable expenses. Company car expenses
can also be claimed, although there is a benefit in kind charge for private
use.
Accommodation costs
– if you are staying away from your normal place of business then you can claim
accommodation costs, providing you do not claim for more than 24 months at a temporary
place of work.
Subsistence costs
– you can claim for subsistence whilst away from your normal place of work, but
again as with accommodation costs, you cannot claim if you have exceeded 24
months at a temporary place of work. Incidental overnight expenses can be
claimed at £5 per might or £10 per night if abroad should you be working away
from home.
Training fees –
providing the training delivers skills that are relevant to your business then
you can claim for the costs involved.
Business insurance
– all genuine business insurances such as employer’s liability, professional indemnity,
property and vehicle insurance are classed as allowable expenses.
Telephone, mobile and
internet fees – providing the contracts are in the name of the business you
can offset the costs against your Corporation Tax. If you work from home then
you can claim the cost of business calls made from your residential telephone
line.
Use of home as office
– home workers can claim £4 per week without receipts, or calculate a proportion
of the household bills.
Computer equipment
– all computer equipment and software used for business purposes can be claimed
for.
Advertising and
marketing costs – anything you spend on promoting your business is an
allowable expense.
Business gifts –
you may gift up to £50 per individual before complex rules apply.
Professional fees
– anything you spend on accountants, solicitors, surveyors, etc. can be claimed
for.
Health care – any
employee who uses a computer is entitled to an eye test, the cost of which you
can claim for. You can also claim for annual employee health checks.
It is advisable to always consult with your bookkeepers or
accountant if you are unsure as to whether an expense is a genuine business one
that can be included in your Corporation Tax return.
