Some new contractors believe that all expenses, business or personal can be paid from company funds – this is not the case and the general rules are:
- The expenses must be have been incurred ‘wholly, exclusively and necessarily’ in the course of carrying out your contract duties.
- Expenses which have both a business and private use cant be reclaimed.
Most genuine business expenses can be offset against the companies corporation tax, and you should always keep receipts to back these up.
The AccountsNet virtual desktop allows you securely store documents and scanned images in the cloud and accessible from desktop or mobile. In addition you can attach particular images or documents to income or expenses, so that they are available at any time.
AccountsNet clients receive a detailed guide on allowable expenses, but here is a list of the most popular expenses claimed:
- Executive pension contributions
- Company stationary, advertising leaflets, promotional material etc
- Company bank account charges including any fines
- Hardware costs related to the business such as laptops, memory upgrades etc
- Software costs such as development packages or anti virus
- Training courses if specifically related to your line of work
- Magazine and subscriptions again if related to your line of work
- Professional Subscriptions if listed and approved by HMRC
- Telephone, mobile and broadband costs but only if the contracts are in the companies name
- For a private phone, you can claim the cost if specific business related calls via the itemised bill
- Accommodation and subsistence costs if working away from home for the first 24 months at the same location
- 45p for the first 10,000 miles and 25p thereafter for business mileage using your own car, or a flat 24p per mile for motorbikes
- £4 per week for use of home as office, or for for ongoing use, a proportion of the household bills
- Accountancy charges
- Costs of an annual eye test
- Company Incorporation and related costs prior to setup (although this cant be offset against corporation tax)
- Advertising and marketing costs for your company
- Up to £150 cost of an annual event, for example Christmas party for directors and employees
- Client entertainment costs (although cant be offset against corporation tax)
- Other professional fees, such as hiring a company employment lawyer for example
All of the reclaimable expenses above assume that you operate outside IR35.
If however, your contract is deemed caught be IR35 then the expenses claims are much less generous.
As well as claiming travel, subsistence and pension costs, you are allowed to claim a further 5% of the turnover of the contract
As always, If you are in doubt whether an expense is valid, call us up for full clarification.