The question most often asked by clients is “what expenses can I claim?”. However, the response isn’t as simple as you would imagine.
What business expenses are allowable and what is The Golden Rule?
All trading expenses must have been incurred “wholly and exclusively” for the purpose of the business. This means that costs must be incurred while undertaking work or trying to attract future work. So, a train ticket to meet a prospective client is claimable but if your main purpose for travel is personal, but you decide to do some work, this isn’t claimable.
It is also important you retain receipts for any expenses you incur. This, not only is needed if HMRC ever request evidence, but will also confirm the amount of any VAT you can claim.
Generally, line rental for your personal phone is not claimable, but the cost of the calls is claimable. Alternatively, the full cost of a separate dedicated business line is claimable. Claiming a reasonable amount of internet costs is generally accepted based upon your level of estimated usage. Likewise with a home phone, you can also claim for the business part of a mobile phone. If you have a business contract you can claim the whole cost.
How are expenses paid or claimed?
The simplest way to pay for costs is directly from your business bank account. However, if this is not possible, you can pay for your expenses personally and then claim it back from your company.
Commonly claimed expenses
With the above in mind, there are many expenses that are commonly claimed and which you can benefit from. The following are just some examples:
Travel expenses and the 24 months rule
If you are working in a contract for less than 24 months you can claim travel costs between your home and place of work. However, as soon as you are aware your contract will continue for longer than 24 months, you may not be able to claim these costs unless your contract changes or the place of work differs.
Read more in our 24 Months Rule guide to learn how you could claim your expenses by it.
Food & meals
If you qualify for travel between your home and work, you will also be able to claim subsistence. You can either claim on a receipt-by-receipt basis or on a flat rate approach. On the flat rate basis, the amount claimable is calculated on the number of hours you are away from home.
Irrespective of how you claim subsistence, always keep your receipts in case your claim is ever queried by HMRC.
5 – 10 hours away from home
10 – 15 hours away from home
Over 15 hours (and beyond 8pm) away from home
If working beyond 8pm supplementary rate
Staying overnight near your place of work or other location may require you to incur additional costs. Claiming for overnight accommodation and a meal is usually allowable as long as this is a reasonable amount.
Use of home as office
As a minimum, we would normally advised to claim an allowance of £4 per week to cover the small amount of work you may do at home.
An alternative method would mean calculating the actual costs of running your home and allocating an element to operating your business from it. Although it does involve more work to calculate the amount, it does result in a much higher amount that you can claim
Telephone & internet
Generally, line rental for your personal phone is not claimable, but the cost of the calls is claimable. Alternatively, the full cost of a separate dedicated business line is claimable.
Claiming a reasonable amount of internet costs is generally accepted based upon your level of estimated usage.
Likewise with a home phone, you can also claim for the business part of a mobile phone. If you have a business contract you can claim the whole cost.
You can claim the full cost of your accountancy fee for all company related matters. Any personal accountancy costs you incur would be deemed a benefit in kind.
If the training relates to improving your skills and can be applied to your work, then you can claim the full cost. Additionally, any travel and other associated costs can also be claimed.
Any equipment needed to perform your work will be fully claimable through the company.
However, if the equipment has a dual use (e.g. business and personal) you will need to ensure that this is not significant. For example, furniture and computer equipment could have a dual purpose but are normally fully allowable against the company. However, the cost of a car, even if predominantly used for business, will have a benefit in kind attached to it.
Business entertainment is not an allowable expense and will not reduce the company taxable profits. However, you are allowed £150 per person for an annual event for staff and you can also include your partner. The allowance include travel costs, overnight stays and the event itself.
Generally, for most types of office based work, you are not able to claim any costs against suits, shoes, or any other clothing.
However, if you need specialist clothing in order to perform your duties, such as gloves, boots or helmets these are generally claimable.
Eye tests, glasses or contact Lenses
You can generally claim back the cost of eye sight tests assuming your work includes computer work.
Subsequently, if you need glasses or contact lenses solely for using the monitor, you will be able to claim this as a legitimate business expense.
Anything else to consider?
This is not an exhaustive list and there may well be other items that are relevant to the work you undertake. If it follows the golden rule outlined above, then it’s likely to be a claimable expense.
However, your dedicated accountant will always be happy to help clarify what can be claimed and what cannot.